Apple (NASDAQ: AAPL) saw a significant decrease in its stock price, with shares falling by 3.6% at the end of Tuesday’s trading session in New York. This decline is the most substantial drop in Apple’s stock since August. It comes in response to Barclays’ decision to downgrade the tech giant and revise its price target for the company’s shares. The downgrade was driven by concerns about a slowdown in iPhone 15 sales in China.
Barclays analyst Tim Long wrote in a note Tuesday,
“We are still picking up a weakness on iPhone volumes and mix, as well as a lack of bounce-back in Macs, iPads, and wearables.”
He added,
“The biggest takeaway from the latest checks is incrementally worse [iPhone 15] data points out of China, together with developed markets remaining soft.”
Long anticipates that the challenges in iPhone sales might persist, even with the upcoming launch of the iPhone 16 later this year. He noted that the new model is not expected to feature significant upgrades over the current version.
In 2023, Apple (NASDAQ: AAPL) witnessed a decline of around $5 billion in iPhone revenue compared to the previous year, reflecting a challenging market environment. Sales of Macs, iPads, and wearables also experienced a downturn, influenced by consumer apprehensions arising from escalating inflation and interest rates. Furthermore, the broader PC industry felt the impact, as fewer consumers felt the need to invest in new systems after a surge in laptop and desktop purchases at the onset of the pandemic.
Barclays analyst Tim Long highlighted Apple’s services business as a possible area of vulnerability for the company, citing concerns related to its App Store practices and other challenges. Apple is under increasing pressure to permit app developers to offer users alternative payment options, bypassing Apple’s standard 30% fee on transactions made through the App Store. This ongoing dispute over payment practices introduces an additional layer of complexity for Apple in navigating its services business.
In addition, the agreement between Apple (NASDAQ: AAPL) and Google, designating Google as the default search engine in the Safari browser, may face jeopardy amid the ongoing antitrust case pursued by the Department of Justice against Google. This lucrative deal, falling under Apple’s services business, is anticipated to generate billions for the tech giant.
On the other hand, Apple’s service business witnessed a surge from $78.1 billion in 2022 to $85.2 billion in 2023. However, Long anticipates that this segment will experience a deceleration in growth in the upcoming years.
Long wrote,
“We model ~10% and ~8% growth in services in FY24 and FY25, well below [the] prior growth estimate of ~20%. In 2024, we should get an initial determination on the Google TAC, and some app store investigations could intensify.”
Meanwhile, Apple is engaged in a legal battle with a medical device company called Masimo over whether the blood oxygen sensor in the Apple Watch infringes on Masimo’s patents.
Apple initially withdrew its Apple Watch Series 9 and Apple Watch Ultra 2 from store shelves ahead of Christmas following a ban on imports of the watches by the International Trade Commission. However, a federal appeals court has ruled that Apple can continue selling the watches while the dispute is resolved in the court system.
Despite potential challenges, Apple is expecting a major breakthrough with the upcoming release of its Vision Pro headset. The company is poised to hold a launch event for the AR/VR headset in February. Should the Vision Pro, dubbed a spatial computer by Apple, prove successful, it has the potential to establish Apple as the leading company for a new era of computing devices.
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