It's not every day that Apple (AAPL 1.30%) shares get a sell rating slapped on them. New Street Research had dropped its rating on the Mac maker to sell last August, and HSBC just followed suit by downgrading Apple to "reduce," the bank's equivalent of a sell rating. HSBC had previously downgraded the stock to neutral back in December. At the time, HSBC analysts expressed concern around slowing hardware growth and overreliance on the iPhone. "Revenues are only supported by higher selling prices and by the development of services," HSBC said last December.

Here's why HSBC is bearish on the Cupertino tech giant, assigning a $180 price target on the shares.

Apple News+ displayed on MacBook, iPad, and iPhone

Apple News+ launched last month. Image source: Apple.

Apple is "too late to the game" and services will take a long time to pay off

At the core of HSBC's thesis is an expectation that Apple's slew of first-party services unveiled last month will underperform and end up taking much longer to make a discernible impact on the company's massive business. At the same time, analyst Erwan Rambourg believes Apple deserves some credit for investing aggressively in its services business.

"Recent announcements on services has Apple putting money where its mouth is but returns could take some time to extract," Rambourg wrote. "While the new offerings may garner consumer attention, we do not expect these services to move the needle significantly. We believe Apple has come too late to the game and its offering[s], by and large do not differ much or are below par to offerings from competition."

Rambourg also believes that the new services will carry lower margins than the rest of Apple's services segment, since they appear to be more cost-intensive than other offerings in the services portfolio. Original video content is notoriously expensive, for example, and Apple TV+ margins will likely be modest. In January, the tech titan disclosed gross margin data for its services business for the first time, revealing services generated a 63% gross margin in the fourth quarter.

HSBC does not think the new services will gain much traction in emerging markets either, potentially adding to other ongoing challenges the company has been facing in those regions. CEO Tim Cook specifically pointed to headwinds in emerging markets when he warned investors that Apple missed its guidance in the fourth quarter. It's worth noting that the company just made an aggressive price cut for Apple Music in India, undercutting rival Spotify, which had just recently launched in India.

Additionally, the new services are unlikely to help Apple sell more hardware, which still represents the majority of overall revenue and gross profit. Product gross profit represented 79% of total gross profit in the December quarter, the analysts note.