As major companies release quarterly earnings updates in the coming days, an investment bank is offering investors a bet on two Big Tech stocks. Analysts at Itaú BBA, Latin America’s largest investment bank, said investors should short Apple and Amazon before quarterly results are released on October 31st. Short selling is the process of borrowing a stock, selling it immediately, and hoping to buy it back later at a certain level. Lower the price and pocket the difference. Investors often use option contracts to take short positions in stocks to limit losses or increase profits. The investment bank said that while both companies are financially healthy and profitable and have good long-term growth prospects, the stock prices are beginning to price in highly optimistic scenarios that are unlikely to come to fruition. . “Overall, our confidence level for this quarter is low, especially for many tech investors,” Itau analysts Thiago Alves Kaprskis and Maria Clara Infantozzi said in a research note to clients. “After a phenomenal year and some positioning that didn’t favor the stocks we like.” The Apple iPhone maker is expected to release third-quarter numbers next week. Analysts expect Apple’s latest feature, Apple Intelligence, to help boost sales of the company’s flagship iPhone. But analysts at Itau said Apple’s stock is “performing well even in a less favorable environment” and pointed to higher valuation levels. Apple stock currently trades at a price-to-earnings ratio of 31 times, compared to an average of 26 times over the past five years, according to FactSet. Kaprskis and Infantozzi added that their confidence level in the bank’s trade proposal is 6 on a scale of 1 to 10, with 10 representing strong confidence. “We like it as a way to fund other ideas,” they said. Analysts at AAPL 1Y Line Amazon Itau said the e-commerce giant’s profit margins have likely peaked, which could lead to a sell-off after Amazon releases quarterly results. “Stocks have reached new highs despite consensus declines almost every day for the past three to four weeks,” analysts said. “We have no confidence that retail margins will continue to rise, and this could again weigh on share prices, especially for third parties.” [third-party sales] However, he warned that Amazon’s cloud computing unit showed “strong acceleration” that should push the stock higher. For this reason, Mr. Kapurskis and Mr. Infantozzi said they ranked the proposed transaction 3 out of 10, adding: “While our confidence level in AMZN is very low, we choose the AMZN 1Y line this time.”
