Apple’s iPhone Woes Weigh on Investors
The tech giant’s stock took a hit on Tuesday, plummeting 3.2% to its lowest point since November, as concerns over soft iPhone sales continue to mount. This marks a rocky start to the year, with the stock down 11% in January, putting it on track for its biggest one-month decline since December 2022.
Analysts Sound the Alarm
Two analyst firms, Loop Capital and Jefferies, downgraded Apple’s stock, citing weak iPhone sales as a major concern. Jefferies analyst Edison Lee noted that recent sales weakness in China has been worse than expected, with independent research indicating an 18.2% decline in iPhone sales in the country during the December quarter. Global unit sales also fell about 5% in the final quarter of last year, amid increased competition in China.
AI Fails to Spark Growth
Moreover, Lee pointed out that US consumers do not yet find smartphone AI useful, making it unlikely to drive a significant upgrade cycle anytime soon. This raises concerns about Apple’s March quarter guidance, which may disappoint investors.
Downgrades Pile Up
Loop Capital expects a “material iPhone demand reduction” starting in the March quarter, which will amplify in the subsequent two quarters. This marks a significant shift in sentiment, as Apple’s recommendation consensus now stands at 4.02 out of five, its lowest since May. Just over 60% of analysts recommend buying the stock, a rate well below other megacap tech stocks.
Valuation Concerns
MoffettNathanson downgraded the stock earlier this month, citing concerns in China and the stock’s valuation. Morgan Stanley also replaced Apple with Seagate Technology as its top pick among IT hardware names on Monday. As a result, Apple’s market capitalization took a hit, erasing more than $110 billion in value and pushing its valuation below Nvidia Corp.’s for the first time since November.
Earnings Loom
Apple is scheduled to report its first-quarter results next week, and investors will be watching closely to see how the company addresses its iPhone sales woes. With analysts increasingly bearish on the stock, Apple will need to deliver a strong performance to regain investor confidence.
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