Apple (AAPL) didn’t have a happy new year on Wednesday, as the company’s shares were downgraded for the third time in less than two weeks. The latest warning comes from Redburn Atlantic’s James Cordwell, who downgraded the stock to Neutral due to fears of slowing iPhone sales and the potential for regulatory downside while keeping his price target at $200.
Barclays and Piper Sandler also downgraded Apple shares last week; Barclays’ Tim Long rerated the stock from Equal Weight to Underweight and lowered his price target to $160 from $161. Meanwhile, Harsh Kumar from Piper Sandler downgraded Apple’s shares to Neutral.
Shares of the tech giant were down nearly 4% in the first few days of 2024 as of Wednesday afternoon. On the other hand, shares of Apple’s Big Tech peers, including Microsoft (MSFT), Google (GOOG, GOOGL), and Meta (META), rose 1.9%, 2.2%, and 4.9%, respectively.
Overall, Redburn Atlantic, Barclays and Piper Sandler point to potential weakness in Apple’s iPhone and services segment. Barclays’ Long and Piper Sandler’s Kumar point to China as a major concern; Long says Barclays’ latest checks show increasingly poor iPhone 15 data from the region, and Kumar points to China’s worsening macro environment.
Greater China is Apple’s third largest source of revenue, behind North America and Europe. In 2023, this area accounted for $72.6 billion of the company’s total revenue of $383.3 billion.
According to Long, while Apple should report December revenue in line with market expectations, the company will report March revenue below market expectations.
Kumar, on the other hand, says that negative news about the ongoing Apple Watch patent controversy and antitrust fights could cause problems for Apple moving forward.
Most analysts still bullish on Apple
But Wall Street isn’t entirely beholden to the iPhone maker. Of the 53 analysts covering Apple, 32 maintain a Buy rating, while 16 have a Hold rating. Only five analysts have a Sell rating on the stock.
Evercore ISI’s Amit Daryanani reiterated his Outperform rating on Apple with a $220 price target and said now might be the time to buy the decline in the company’s stock price.
While he acknowledges that Apple Watch bans are problematic and that Apple’s multibillion-dollar deal to make Google the default search engine in Safari may be at risk, there are more positives than negatives in Apple’s story.
“As some fears subside and we shift to a more positive news flow (Vision Pro), [Apple] “We may begin to re-rate more positively,” Daryanani wrote.
Morgan Stanley’s Erik Woodring says Apple’s 2024 could offer a big upside for the company.
“Not only do we believe the fundamentals are on the path to recovery (albeit with some irregularities in the short term), but more importantly, we believe that 2024 will be the year that Apple’s ‘Edge AI’ opportunity, highlighted by a graduate-supported master’s program, will likely come to fruition.” “Siri 2.0 and a broader Gen AI-enabled operating system with the potential to catalyze an iPhone upgrade cycle (unveiled at WWDC in June),” he wrote in a note to investors.
Apple hasn’t specifically announced a generative AI offering; instead, it focused on machine learning to improve the accuracy of its autocomplete feature. However, the company is reportedly working hard to integrate the technology into its future products.
Apple may also benefit from an expected revival in laptop and desktop sales as consumers who bought computers at the beginning of the pandemic began looking for newer, faster systems.
This all comes as Apple is preparing to launch its $3,499 Vision Pro spatial computing headset in February. Pre-orders for the device start on January 19. Apple’s first new product category in nearly a decade, the Vision Pro, is expected to have a slow start to sales due to its relatively high price.
Depending on how the launch of the Vision Pro goes, Apple could attract a significant amount of interest in the headset among both consumers and enterprise users. No, most people won’t be able to afford the Vision Pro, but just generating excitement around the product could benefit Apple’s stock price.
With the launch of the Vision Pro just a few weeks away, we won’t have to wait long to see whether Apple’s slow start to 2024 is a coincidence or a long-term trend.
Daniel Howley He is the technology editor of Yahoo Finance. He has been interested in the technology sector since 2011. You can follow him on Twitter. @DanielHowley.
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