On Friday, Apple’s stock (NASDAQ:AAPL) experienced a 3% decline following disappointing news for Wall Street. The company provided a forecast that suggested subdued growth during the quarter traditionally marked by robust holiday season sales. This drop resulted in a potential market value loss of over $80 billion, considering its premarket share price of $172. Apple’s shares had previously surged by almost 40% over the course of the year.
Apple’s outlook for quarterly sales fell short of market expectations, citing weak demand for iPads and wearables, particularly in China, a critical market. This projection raised concerns about overall holiday demand, with various estimates, including those from the U.S. National Retail Federation and Deloitte, indicating that sticky inflation could lead to the slowest sales growth during the crucial holiday shopping period in years.
Bernstein, a brokerage firm, noted, “Apple’s revenue growth has stalled over the past few quarters – and appears likely to continue to stagnate over the next year,” emphasizing that the holiday quarter typically sets the tone for Apple’s fiscal year, which extends until September.
As a result of this news, at least 11 analysts reduced their price targets for Apple’s stock, causing the median price target to drop to $196.5, according to LSEG data. Apple’s current valuation trades at nearly 26 times its 12-month forward earnings estimates, which is relatively low compared to other prominent tech stocks known as the “Magnificent Seven.”
Analyst Tom Forte from D.A. Davidson remarked, “We view management’s flat sales guidance as proof the company cannot rely on iPhone sales to drive shares higher, as it has in the past.” However, it’s worth noting that iPhone sales did increase during the September quarter, and further growth is expected in the final three months of 2023.
Apple’s CEO, Tim Cook, reassured investors by highlighting the success of iPhone 15 models in China, dispelling concerns that the company was losing market share to competitors like Huawei and local smartphone sellers. Cook stated, “In mainland China, we set a quarterly record for the September quarter for iPhone.”
Several analysts responded positively to these remarks, with Dan Ives, an analyst at Wedbush Securities, expressing optimism about the outlook for Apple’s services business, which had displayed strong growth in the September quarter and helped the company surpass quarterly revenue expectations.