Despite the broader market's rally, Apple experienced a downturn today.
Apple's shares took a hit on Tuesday, dropping 4.1% at 12:30 p.m ET, with Wall Street analysts casting a skeptical eye on the tech giant. Not one, but two sell-side analysts downgraded their views on Apple, sounding the alarm for potential investors.
Jefferies analyst Edison Lee led the charge, downgrading Apple from a hold to an underperform and slashing his price target from $211.84 to $200.75. Lee's change of heart was influenced by International Data Corporation (IDC) data, which pointed to a potential 2% decline in iPhone shipments during the December quarter. However, this might be optimistic, with IDC predicting a more significant 4% dip in sales.
The Chinese market, Apple's biggest revenue contributor, is the main source of worry. Independent research indicates a staggering 18.2% decline in iPhone sales in China, a sign of a struggling consumer base favoring low-cost domestic rivals like Huawei and Xiaomi. Meanwhile, Apple's AI-fueled upgrades, such as Apple Intelligence, have yet to gain significant traction with consumers, raising questions about the anticipated AI upgrade cycle.
Loop Capital, following suit, also downgraded Apple from buy to hold, citing weak trends in the present and a possible negative outlook for the March quarter. Still, Loop maintains a positive outlook on Apple's long-term growth due to its potential as an AI beneficiary, but the desired transformation seems delayed.
The tech giant's high valuation—at 36 times earnings—and China-related complications have raised concerns among analysts. Despite the challenges, Apple's loyal customer base suggests no imminent danger, but its valuation leaves little room for error.
[1] Jefferies' concern is largely centered around the lukewarm reception of Apple's AI-enabled smartphones, including Apple Intelligence.
[2] Huawei and Xiaomi are significantly impacting Apple's market share in China, causing iPhone sales to plummet.
[3] Analysts are concerned about Apple's pricing, high valuation, and its execution in AI.
[4] Apple is grappling with regulatory and competitive challenges, including investigations into its sourcing practices in the Democratic Republic of Congo and ongoing antitrust lawsuits.
[5] Despite beating analyst expectations for overall sales, Apple's iPhone sales for the December quarter fell short of projections, with weak demand in China and markets without Apple Intelligence contributing to the trend.
Given the current market circumstances, investors might want to reconsider their finance strategies regarding Apple, considering the downgrades from Jefferies and Loop Capital. These financial analysts have expressed concerns about Apple's performance, particularly its lukewarm reception of AI-enabled smartphones and significant market share losses in China to competitors like Huawei and Xiaomi.
