Is Apple losing its golden touch? Recent data indicate that the tech giant is at a crossroads, with everything from stagnating sales to increased competition contributing to a bearish outlook. Let’s dive into the recent developments and what they mean for your portfolio.
Earnings Expectations and iPhone Sales
Apple’s fourth-quarter earnings report paints a grim picture. The company faced a fourth consecutive year-over-year revenue decline, falling to $89.3 billion from $90.1 billion. Even though sales overall beat expectations, the key segments showed troubling figures. Mac revenue dropped dramatically to $8.5 billion from $11.5 billion, while iPad revenue also fell to $6.2 billion from $7.1 billion.
But it’s the iPhone sales that are sounding alarm bells. Sell-through numbers for the iPhone dropped by 6% in the September quarter, raising serious concerns. UBS analyst David Vogt pointed out that despite growth in Apple’s services division, the stagnancy in iPhone sales is a significant drawback, potentially pulling Apple down in a fiercely competitive market.
Stock Performance and Market Challenges
The recent dip in Apple’s stock reflects these troubles. After revealing their earnings, Apple’s shares fell by 4.8%. The broader market conditions haven’t helped either, with a sluggish economy, persistent inflation, and intensified competition from tech rival Huawei adding fuel to the fire.
Industry experts are vocal about the challenges ahead. David Vogt suggests that “structural and transient factors” are at play, including heightened competition from Huawei in China. Similarly, Morgan Stanley’s Erik Woodring identifies four troublesome forces: unfavorable year-over-year comparisons, a stronger dollar, iPhone supply constraints, and cautious consumer spending.
Let’s break these points down even further:
“In our view, a downtrodden economy with pernicious inflation, an emboldened Huawei, incremental updates in the new iPhone family, and a mature smartphone market paint a bleak picture for iPhone trends.”
Brian White of Monness, Crespi, Hardt & Co.
“We believe the data suggests increased competition from Huawei in China is likely to be a headwind next year.”
David Vogt
“Apple has four key forces working against it this December quarter—an unfavorable compare vs. last year, a stronger [U.S. dollar], iPhone 15 Pro/Pro Max supply constraints, and cautious consumer spending.”
Erik Woodring
Valuation Concerns and Future Projections
Apple’s valuation is another thorny issue. Trading at lofty historical levels with a P/E ratio around 23 and a forward P/E of 20.7 versus the S&P 500’s metrics, investors are questioning if Apple’s current valuation is justifiable. Analysts predict a mere 1% revenue growth for fiscal 2024 and only 6% for 2025, which might prove insufficient given the current high valuation.
An investor put it bluntly:
“Apple’s stock is no longer a growth or value stock; it’s just expensive.”
The numbers further confirm this outlook:
| Date | Apple Stock Change | Broader Market Impact | Reasons |
|---|---|---|---|
| January 2, 2024 | -3.6% (premarket) | Stock index futures in the U.S. slipped | Apple downgraded by Barclays, weakening iPhone demand |
| March 5, 2024 | -2% (shortly after market open) | Apple’s stock experienced a significant decline | Decrease in iPhone sales in China, concerns about AI initiatives |
| May 22, 2024 | -11% year-to-date | Apple’s market capitalization down by $368 billion | Decline in iPhone sales, slowing growth prospects |
| July 6, 2024 | -1.63% | Broader market decline, affecting technology stocks | Unspecified market decline |
Chief Investment Officer Chris Zaccarelli of Independent Advisor Alliance stated, “The economy is likely to stay out of a recession if interest rates are lower than they are now, but ultimately, it is the economic expansion and continuation of corporate profits that are the most important things in the medium and long term.”
From stagnating iPhone sales to troubling revenue figures, Apple’s stock is facing significant headwinds. As analysts point out, the road ahead is fraught with challenges, demanding a cautious approach from investors. Your move, savvy investors—now’s the time to scrutinize and strategize.
