Key points
- Apple has abandoned plans for its electric vehicle in favor of chasing its luck with artificial intelligence.
- Analysts yawned at the news and said Apple must catch up with artificial intelligence or lose relevance.
- The stock is moving lower and may break support due to its high valuation and weak iPhone sales in China.
- 5 stocks we like more than Apple
It’s no surprise that Apple NASDAQ:AAPL has abandoned plans to build an electric vehicle. After a decade of effort, the goal of launching a 100% autonomous vehicle in 2024 failed to produce even a timeline of when a car might arrive, and now we’re in 2024. Add in the fact that the market bubble of electric vehicles has exploded, and there are more fruits to be reaped, and it makes sense for the change. Ultimately, Apple’s appeal in the world of electric vehicles will be the software and operating systems rather than the vehicles, which plays a role in which path the company is moving towards. TO THE.
Analysts were not fazed by the news. After a brief farewell to the project, they focused on artificial intelligence and Apple’s need to catch up. The company appears behind in implementing AI across its ecosystem, a significant missed opportunity. Analysts at Rosenblatt believe the company is losing its position as the market’s innovative and disruptive consumer technology leader, which could impact the valuation. The stock trades at premium valuations to the S&P 500 and may not be able to maintain that without a new catalyst.
Wedbush’s Dan Ives, among the most ardent supporters, is trying to look beyond the first half of 2024 in favor of better days ahead. In his view, the recent string of bad news isn’t a reason to buy stocks, but it’s nothing investors haven’t seen before. Each time, the company has emerged as a winner and delivered results that are beneficial to shareholders. Soon the company will face simpler competitions and there is also the World Developers Conference to look forward to. Apple is expected to reveal more details about its AI plans at its June event.
Apple stock prices are under pressure as bears gain ground
Apple shares hit a peak in mid-2023 that could turn into a long-term high. The company is struggling with traction and it looks like 2024 results will be weak. The latest data from China, about 20% of the company’s revenue last year, is not good. According to Counterpoint Research, iPhone sales fell 24% in the first six weeks of the year and will impact the company’s 2024 results, which are already expected to be weak.
Declining iPhone sales in China could impact first-quarter revenue by low single digits and have an accelerated impact on profits due to margins. iPhone margins in China are among the highest for the company, beating the U.S. and Europe by hundreds of basis points. The worse news is that sales recovery will be difficult to achieve because the company is losing market share to the Huawei Mate 60 line of phones launched last year.
Apple analysts expect the company’s revenue to contract in the first quarter, but underestimate the iPhone’s potential for weakness. The consensus is for a 4% decline, despite much larger contractions indicated for its supply chain. Foxconn, which assembles about 70% of iPhones, reported a 12% drop in February sales and a 17% drop in the first two months, suggesting Apple’s miss could be notable. iPhones account for more than 50% of the company’s revenue.
Analysts expect a 20% rise in Apple shares
Analyst sentiment has changed over the past two quarters, including numerous reductions and downgrades in price targets, but remains solid and bullish. Thirty-three tracked by Marketbeat rate the stock a Moderate Buy and see it advancing 20% at the midpoint. The 20% target is attractive but may be a high target and soon to be corrected. The midpoint has been trending upwards over the past year, but has stalled recently, up just 3% in the previous quarter and 0% in the past month, and may fall given the latest news.
Apple’s stock price fell nearly 3% after the release of iPhone sales data in China. The move takes the market to four-and-a-half-month lows and risks breaking through critical support at the bottom of a range. Critical support is near $167.50 and, if exceeded, would open the door for a deeper decline. In that scenario, this market could fall back into the $140 range. The next earnings report is expected in early May.
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