Apple stock was hit by 2 drops on weak iPhone sales, AI outlook
Jefferies analyst Edison Lee of the investment bank downgraded his rating on Apple stock to underperform and lowered his price target by 13 percent to $200.75 on Monday. Loop Capital upgraded Apple stock from buy to hold, with a revised price target of $230, down from $275.
In an investor note, Apple said it expects to report lower-than-expected results in the December quarter and miss expectations due to weak iPhone sales in the second quarter and lack of interest in AI among consumers.
Apple shares were down as much as 3.7% by midday on Tuesday. The stock is up 16 percent over the past 12 months. Big tech rivals Meta ( Meta ) and Alphabet ( GOOG , GOOGL ) are up 36% and 30% over the past year, respectively, while Microsoft ( MSFT ) is up just 3.5%. The broader S&P 500 rose 20% over the same period.
According to Lee, iPhone sales in China are down 15 percent to 20 percent year over year. Apple is battling a number of headwinds in the region, including increased domestic supply from Huawei and Xiaomi and cautious consumer spending amid a sluggish economy.
Apple isn’t just dealing with trouble in China. Overall, iPhone market share fell about 1 percent year-over-year to 23 percent in Q4. IDC. Although smartphone shipments increased by 3%, Canalis reports.
For the first quarter, Jefferies predicts that iPhone revenue will fall 0.4 percent year-over-year and Apple’s overall sales will grow 2.8 percent, down from the company’s prior forecast of 4.6 percent.
Part of Apple’s case, Lee argued, is that the company’s big push into AI isn’t panning out as much as investors had hoped. Apple Intelligence, the artificial intelligence platform for iPhone, iPad and Mac, is expected to start a sales supercycle. But if the IDC and Canalys estimates prove to be correct, it will throw cold water on the rise of AI sales.
Apple began rolling out Apple Intelligence in batches in October. It’s a risky move for Apple, which generally unveils its latest and greatest products and services at once with big, dramatic launch events. That makes it difficult for customers to know when the platform will reveal all its capabilities, when Apple debuts Apple Intelligence in June 2024.
AI smartphones and their counterparts, AI PCs, are struggling to gain traction despite a big sales push by tech giants from Apple and Google to Microsoft and Intel.
Apple’s iPhone is its most important product, and China is one of its most important sales regions. In the year 2024the iPhone accounted for $201.1 billion of its total revenue of $391 billion. The company’s second-largest business segment, the services division, brought in $96.1 billion.
