In a less-than-rosy start to the new year, Apple Inc. (AAPL) finds itself grappling with a series of stock downgrades, marking the third within a fortnight. On Wednesday, Redburn Atlantic’s James Cordwell delivered the latest blow by lowering the tech giant’s stock rating to Neutral, maintaining the price target at $200. Apple stock’s third downgrade is rooted in apprehensions about decelerating iPhone sales and potential regulatory challenges.
Barclays and Piper Sandler had previously issued downgrades last week, further exacerbating Apple’s predicament. Barclays’ Tim Long shifted the stock from Equal Weight to Underweight, slashing the price target from $161 to $160. Simultaneously, Piper Sandler’s Harsh Kumar downgraded Apple to Neutral.
As of Wednesday afternoon, Apple’s shares have suffered a 4% decline in the first few days of 2024. In stark contrast, its Big Tech counterparts, including Microsoft (MSFT), Google (GOOG, GOOGL), and Meta (META), have seen gains of 1.9%, 2.2%, and 4.9%, respectively.
The consensus among Redburn Atlantic, Barclays, and Piper Sandler is the potential vulnerability in Apple’s iPhone and services segment. Concerns about China loom large, with both Barclays’ Long and Piper Sandler’s Kumar pointing to the region as a major worry. Long cited Barclays’ recent checks indicating worsening iPhone 15 data points in China, while Kumar highlighted the country’s deteriorating macro environment.
China stands as Apple’s third-largest revenue driver, contributing $72.6 billion to the company’s total revenue of $383.3 billion in 2023, trailing only North America and Europe.
Despite the pessimistic outlook, not all analysts are bearish on Apple. Of the 53 analysts tracking the company, 32 maintain Buy ratings, 16 have Hold ratings, and only five assign Sell ratings.
Evercore ISI’s Amit Daryanani expressed optimism, reiterating an Outperform rating on Apple with a $220 price target. He believes the current downturn presents a buying opportunity, emphasizing that positive developments, such as the introduction of Vision Pro, could lead to a more favorable market response.
Morgan Stanley’s Erik Woodring sees potential for Apple’s resurgence in 2024. Woodring highlights the expected unveiling of Apple’s ‘Edge AI’ technology, particularly an LLM-powered Siri 2.0 and a broader Gen AI-enabled operating system, both anticipated at WWDC in June. Woodring suggests these advancements could spark an iPhone upgrade cycle.
Amid concerns about Apple Watch bans and the Google search engine deal, Daryanani acknowledges more positives than negatives in Apple’s trajectory.
As Apple anticipates the launch of its $3,499 Vision Pro spatial computing headset in February, industry experts predict a slow initial sales start due to the high price. Nevertheless, the potential buzz around the product may influence Apple’s stock positively.
With the Vision Pro launch imminent, the industry awaits to determine if Apple’s sluggish start to 2024 is a transient setback or indicative of a more enduring trend.
Despite Apple stock’s third downgrade, analysts’ positive forecasts, particularly regarding the upcoming Vision Pro launch and advancements in ‘Edge AI,’ inject an air of optimism into the company’s outlook, leaving room for potential recovery and renewed investor confidence in the coming year.
As of January 10th, at 3:40 PM GMT-5, Apple Inc’s stock is priced at $185.90, showing a day’s increase of $0.76 (0.41%).
Source: Yahoo Finance
