Volatility is still very much alive and well.
All as markets head lower after Apple stunk up the market, cutting sales guidance for the first time in 15 years. All thanks to a drop in iPhone sales, China’s economy and trade war tensions.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” said Apple CEO Tim Cook, as quoted by Yahoo Finance. “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”
Apple now expects to post first quarter revenue of $84 billion, which is below its initial guidance for $89 billion to $93 billion.
As you can imagine, investors and analysts alike aren’t too pleased with the news.
Analysts at Jefferies downgraded the stock from a buy rating to a neutral rating, noting, “Biggest miss in years. Apple’s business in China appears to be rapidly deteriorating.
“The bottom line is that we were are late, but we can no longer recommend Apple,” says analysts at Macquarie, which also downgraded the stock to a neutral rating.
Bernstein analysts cut their Apple price target from $210 to $160. Bank of America cut its target from $220 to $195. Morgan Stanley just cut its target from $236 to $211. JP Morgan cut from $266 to $228. And Goldman Sachs cut from $182 to $140.
The list of analyst cuts goes on and on. None are happy with the latest news.
And rightfully so… While the story develops, we’re still finding opportunity.
In fact, here is a list of stocks to watch.
Hot Stock No. 1 – Square Inc. (SQ)
As 2019 begins, we believe Square is one of the must-own stocks of the year. Granted, last year wasn’t it’s finest and we were knocked out of a previous trade, but it’s got a lot going for it. For one, third quarter revenue was up 51% year over year. Adjusted revenue was up 68%. That’s up from growth rates of 48% and 60% in the second quarter.
Analysts are taking advantage of the pullback, too. Canaccord Genuity for example just upgraded SQ to a Buy from a Hold, noting they had “been on the wrong side of Square stock for some time,” as noted by Barron’s. The firms also noted it sees a long-term opportunity given Square’s status as a “truly disruptive company.”
Hot Stock No. 2 — First Trust US Equity Opportunities ETF (FPX)
The FPX tracks hot IPOs in their first 1,000 days of trading. The investment objective of the Fund is to replicate as closely as possible, before fees and expenses, the price and yield of the IPOX®-100 U.S. Index.
By buying it, not only can you avoid paying gobs of money for IPOs that may or may not work out, but you’re also being exposed to multiple hot IPOs at the same time at lesser cost. In fact, even with some of the most obnoxious IPO failures, the ETF managed to run from a 2009 low of around $11 to a recent high of $75. It’s a safer alternative than risking your hard-earned money to another potential flop, as SNAP-like stocks turned out to be.
At the same time, the FPX ETF gives you exposure to some of the hottest IPOs coming up in 2019, including Uber. Lyft, Palantir, Pinterest, and Rackspace.
Hot Stock No. 3 — iPath S&P 500 VIX Short-Term Futures (VXX)
This is just one way to trade escalating volatility.
The investment seeks to provide investors with exposure to the S&P 500 VIX Short-Term Futures Index Total Return. The S&P 500 VIX Short-Term Futures™ Index Total Return is designed to provide access to equity market volatility through CBOE Volatility Index® futures.