On Tuesday, Apple experienced a 3% decline as Barclays downgraded the stock, expressing concerns about weakening demand for Apple products, including the iPhone and Mac, throughout 2024.
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Barclays, the second brokerage to give Apple a "sell" rating, marked a shift in sentiment, making it the most bearish the company has seen in at least two years, according to LSEG data.
Since early last year, Apple has been grappling with a slowdown in demand and has projected lower-than-expected sales for the holiday quarter. The competition in China, particularly from local rival Huawei, has added to Apple's challenges.
Barclays, in a client note, expressed disappointment in the iPhone 15's performance and anticipated a similar trend for the upcoming iPhone 16. The concerns extend beyond China, with subdued demand observed in developed markets as well.
Adding to the worry, Barclays highlighted increasing risks for Apple's services business, which has faced scrutiny, especially in the United States, regarding its app store practices. Despite being a significant revenue contributor, accounting for nearly a quarter of the company's total revenue, the services business is facing potential headwinds.
The downgrade from Barclays, shifting the stock to "underweight" from "neutral," comes with a trimmed 12-month price target of $160, down by $1. Before this, Itau BBA's "sell" rating in July 2022 was the sole bearish outlook on Apple.
The decline in Apple's shares on Tuesday was anticipated to erase about $90 billion from its market capitalization. Despite a stellar performance in 2023, where the stock rose nearly 50% and hit a record high in mid-December, this recent downgrade is causing some concern.
Barclays analyst Tim Long, rated two out of five stars for his accuracy on Apple estimates, underscores the mounting challenges for the tech giant in the year ahead. Analysts, on average, still rate Apple as a "buy," with a median price target of $200, but the current market conditions and concerns about future demand are putting pressure on the company's valuation. Apple currently trades at about 28.7 times its 12-month forward earnings estimates, significantly higher than the benchmark S&P 500's 19.8. The road ahead may prove challenging as Apple navigates these headwinds in 2024.**
