Apple (AAPL) investors have seen better days, that much is certain. AAPL, which had a triumphant run last year with a 49% gain in 2023, is now grappling with a disappointing performance in 2024. Shrugging off the towering 44% returns of the Nasdaq Composite ($NASX) last year, AAPL is currently down by 11% year-to-date, earning the dubious honor of being the worst-performing FAANG stock for the second consecutive year. In this murky financial landscape, even Tesla (TSLA) has taken a beating worse than Apple, nosediving by 31% this year.
Moreover, Apple recently bid adieu to its $3 trillion market cap crown, conceding the title of the world’s most valuable company to Microsoft (MSFT). As if that weren’t enough, there looms a shadow of the possibility that Nvidia (NVDA), another tech behemoth’s market cap, might just eclipse Apple’s.
The Downturn of Apple Stock
Apple’s stock demise doesn’t stem from a singular cause. Firstly, the company’s growth engine sputtered, witnessing YoY revenue declines throughout the last fiscal year. Particularly in China, Apple faced a perfect storm of economic sluggishness paired with formidable competition from local smartphone manufacturers, notably Huawei.
Secondly, Apple’s regulatory woes have only deepened, with the European Commission slapping the iPhone maker with a hefty $2 billion fine for antitrust violations. This spells déjà vu for those familiar with Alphabet (GOOG), which has weathered a similar storm over its Play Store policies.
Thirdly, Apple finds itself devoid of a groundbreaking revenue driver akin to the iPhone. Despite the revenue potential of the Vision Pro headset, it’s unlikely to move the needle significantly for a company raking in nearly $400 billion in annual revenues. Interestingly, Apple reportedly abandoned its electric vehicle ambitions, a move that could have substantially expanded its total addressable market.
Forecast for Apple Stock: Even Warren Buffett Quiets Confidence
Berkshire Hathway (BRK.B), under the stewardship of investment luminary Warren Buffett, parted ways with 10 million Apple shares during Q4 2023. While the sale only chiseled about 1% off its AAPL holdings, it marked the first Apple shedding by the conglomerate since 2020. Adding to the pessimism, Apple witnessed a trifecta of downgrades in January, a rarity for the Cupertino giant.
Notably, Apple has a “Moderate Buy” consensus rating among analysts, with a mean target price of $207.56, signaling an optimistic trajectory about 20% higher than the recent closing price.
Anticipating the Rebound of Apple Stock
It’s my contention that Apple stock has touched its nadir and boasts limited downside from its current levels. While Apple may have missed the bandwagon of AI stock surges, its pivot towards artificial intelligence should reinvigorate its fortunes. However, Apple faces the onus of proving to the market its competitiveness in AI integration across its product spectrum. While AAPL may not replicate Nvidia’s meteoric rise, this strategic shift is crucial for Apple to regain lost ground in the AI upsurge.
Presently, Apple grapples with market aversion mainly due to apprehensions surrounding its China operations. Concurrently, entities like Tesla and Nike (NKE), reliant on substantial Chinese revenues, bear the brunt of the market slump in that region. To complicate matters further, the specter of Donald Trump returning to the White House amplifies uncertainties. Investors vividly recollect Apple’s Q4 2018 stock plunge as U.S.-China trade tensions escalated under Trump’s administration. With talks of imposing tariffs soaring above 60% this time, the stakes are at an alarming height.
Summing up, Apple’s resurgence hinges on a delicate interplay of macroeconomic factors alongside company-specific initiatives. During the fiscal Q1 2024 earnings call, Apple CEO Tim Cook teased forthcoming details on its AI projects later in the year, possibly serving as the much-needed catalyst to rally AAPL bulls.