The new year is less than a month away, but it looks like it’s been a lot longer for Apple (AAPL) watchers. The tech giant is making headlines left and right as it grapples with a series of declines in its stock price, faces necessary major changes to its App Store policies, and prepares for a potential antitrust lawsuit that could target a large portion of its business.
All of this comes as Apple is preparing to launch its $3,499 Vision Pro headset. Vision Pro, Apple’s most ambitious product in recent years, catapults the company into a product category where even established players such as Meta (META) are struggling to succeed.
At least there’s a lot to say.
But it’s not all doom and gloom for Apple. Productive AI-equipped iPhones and the re-acceleration of the company’s services business will help the goose grow in the coming years. If Vision Pro is successful, it will provide Apple with an entirely new revenue stream in both its hardware and services segments.
“I don’t think Apple is under any kind of existential threat right now that hasn’t existed before,” Gene Munster, managing partner at Deepwater Asset Management, told Yahoo Finance. “They just attend markets [have] growth is slower and they are looking for ways to increase that growth.”
Apple’s China slowdown
China is Apple’s third largest market, generating $72.6 billion of the company’s total revenue of $383.3 billion in 2023. North America, Apple’s largest market, generated $162.6 billion in revenue, while Europe generated $94.3 billion in revenue.
All this suggests that the slowdown in iPhone sales in China is perhaps Apple’s biggest and most pressing story. The revival of Huawei, which has managed to produce smartphones with modern processors and features despite the slow economic recovery and US sanctions, is expected to hurt Apple’s market share in the country.
According to Counterpoint Research, the iPhone maker controlled 15% of the Chinese market in the third quarter of 2023. This was slightly better than Huawei’s 14%, but behind Vivo’s 16% and Oppo’s 19%.
Analysts at Barclays, Piper Sandler and Redburn Atlantic pointed to the region as a potential problem for Apple, while Barclays’ Tim Long said the firm sees iPhone 15 data from China as “increasingly worse.” He also added that he doesn’t foresee “any features or upgrades that will make iPhone 16 more interesting.”
Redburn Atlantic’s James Cordwell also addressed China in his note dated January 10 and said that he remained concerned about Apple’s competitive position in the country.
Piper Sandler’s Harsh Kumar and Robert Aguanno said the worsening macro environment in China could negatively impact Apple’s mobile phone business.
“We emphasize in our outlook that China is a key driver for sales next year,” Aguanno told Yahoo Finance. “Any recovery in iPhone growth expectations will also be supported by the reemergence of the Chinese consumer, as well as major growth in other emerging markets such as India.”
Antitrust concerns and App Store changes
Apple is also struggling with reports that the Justice Department is preparing to file an antitrust lawsuit against the company. According to the New York Times, the department could file the lawsuit, which will focus on Apple’s strategic hardware and software moats, as early as March.
Critics have long called for antitrust enforcers to take action against Apple for creating policies that block users from accessing apps on third-party app stores or prevent device and app makers from using certain hardware features, such as the mobile payment technology of Apple’s iPhone.
The European Union is also pushing Apple to loosen restrictions on its App Store, including allowing third-party app stores on the iPhone. The company has also created new App Store rules in the US that allow developers to advertise third-party links for app purchases outside of the App Store. Apple will continue to receive commission on these sales, but will reduce this amount from 15% or 30% to 12% or 27%.
That drew a sharp rebuke from longtime rivals like Spotify, which said Apple’s changes didn’t go far enough.
Vision Pro is a risky bet
Apple’s new Vision Pro AR/VR headset also forms an important part of the 2024 equation. The device, which is available for pre-order and will be released on February 2, is a big gamble for Apple, which plans to enter a completely new market.
With a starting price of $3,499, the Vision Pro will not achieve as much sales volume as the iPhone. While initial reports say pre-orders have sold out, there’s no guarantee that interest in spatial computing will remain high.
“The initial sales data from the launch of the device are encouraging for us, but we will still be cautious about the long-term prospects of the device,” Aguanno said. “It’s too early to say that here.”
Apple’s long-term prospects remain strong, analysts said. Bank of America analyst Wamsi Mohan told Yahoo Finance Live that he has a high degree of confidence that Apple will continue to move higher in the coming years.
“It’s primarily about generative AI in iPhones,” he said. “We think this will be a big catalyst.” Mohan also added that he believes Vision Pro will have long-term potential on the hardware and services front.
Aguanno offered a similar perspective on the company’s future outlook, saying Apple’s market position and product set are solid.
We’ll get our first taste of Apple’s 2024 performance when it reports earnings on February 1.
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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