The price of Apple shares on Tuesday, January 2, showed a drop of 3.6%.
The mentioned decrease in the specified figure was the largest one-day decrease in the price of the tech giant’s securities since September. Against this background, the company’s market value was reduced by more than $107 billion.
The drop in figures came after Barclays analysts released their expectations for the commercial results of the next generation of the iPhone smartphone and downgraded Apple. Experts believe that the new generation of smartphone will not cause a high level of consumer demand. Against the backdrop of these expectations, they downgraded their Apple rating to underweight and a target price of $1 to $160.
Analysts said that their forecasts for the iPhone 15, which is already on the market, are negative. They also noted that there is currently no reason to believe that the commercial result of the next-generation smartphone will be better.
Last year, Apple’s stock price increased by about 50%, reaching an all-time high. The market value of the technology giant was fixed at a kind of historical mark of $3 trillion. These results were based not only on specific performance indicators of the company but also on investors’ expectations that the iPhone 15 would be able to overcome the unfavorable state of affairs in the macroeconomic environment. But the reality turned out to be less positive.
Competition from local manufacturers has increased in the Chinese market, which is one of the most important commercial spaces for Apple. In this case, Huawei’s success in making smartphones is of primary importance. Also in China, the tech giant has faced the problem of restrictions from the authorities. Last year, the media reported that Beijing had banned employees of several government organizations and state-owned companies from using iPhones in the workplace. During 2023, the scope of this restrictive practice expanded.
Also in December, the media reported that in many Chinese provinces, company executives are encouraging employees to use devices from local manufacturers. Some analysts believe that these measures will negatively apply not only to Apple but also to other foreign brands. These prospects correspond to Beijing’s desire to achieve technological sovereignty against the background of strained relations with Washington, which have already caused restrictions on Chinese companies’ access to advanced chips.
The new underweight means that Apple has five sell or equivalent ratings in contrast to 34 buys and 14 holds. The stock’s recommendation consensus stands at 4.08 out of 5, which is the lowest since October 2020. The average analyst price target envisions a 7.5% return during 2024.
Barclays analysts also drew attention to the lack of recovery in sales of Apple products such as Macs, iPads, and wearables. They expect the growth of the tech giant’s profitable service business to slow down in 2024. In their opinion, this trend will be due to careful control by regulators. Currently, the gross profit of the technology giant related to services is twice the margin received from all hardware products.
Barclays downgraded the company to underweight for the first time since 2019.
It is worth noting that, despite the problems, Apple continues to be one of the main players in the technology industry. The company has a loyal customer base. This means that there is a certain group of consumers for whom the choice in favor of the products of this brand is something like an unconditional idea that is beyond doubt. They only buy Apple devices. The technology giant also offers consumers a wide range of products and services. The company has overcome difficulties in the past.
Investors will be closely watching how the tech giant reacts to the downgrade and what measures it will take against the background of negative expectations regarding sales of the iPhone 15.
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