Applethe undisputed leader in the technology sector, is facing a critical moment with a double challenge: On the one hand, the US Department of Justice is preparing a antitrust case which may represent the most significant risk to the company; On the other hand, the main iPhone supplier, Foxconn, recently reported a decline in revenues, raising concerns about the sales prospects of Apple devices.
Falling Apple shares and the Antitrust threat
Last Friday, Apple's stock fell slightly decrease of less than 1% in response to a story reported by the New York Times, according to which the US Department of Justice is preparing a possible antitrust lawsuit against the iPhone company.
The cause could concern the exclusive connectivity of the Apple Watch with the iPhone, the iMessage service available only on Apple devices and the Apple Pay payment system. If this legal action takes place, it will represent the biggest antitrust threat for Apple in recent years, considering the United States as its most important market.
Legal concerns aren't the only obstacle Apple is facing these days. Investors and analysts are increasingly concerned about the regulatory risksincluding the new European legislation on control of the App Store and iPhone software distribution. Furthermore, CFRA analyst Nick Rodelli expressed concerns about legal risks despite the 48% increase in Apple's stock price over the course of 2023. Apple CEO Tim Cook will face the maximum European Commission antitrust authority, Margrethe Vestagernext Thursday.
“We are still seeing weakness in iPhone volumes and mix, as well as lack of recovery in Mac, iPad and wearables”
Barclays analysts wrote and declared this in a note to investors last Tuesday.
In addition to the Antitrust matter: Apple's supplier, Foxconn, declares revenue declines
In parallel, Foxconn, the main supplier and assembler of iPhone, reported a revenue contraction in the fourth quarter of 2023, with a year-over-year sales decline outlook for the first quarter of 2024. Revenue in the final quarter of 2023 reached NT$1.85 trillion, showing a decline of 5.4% compared to the previous year. This decline has been attributed primarily to weak or stable sales of information technology products, intelligent consumer electronics products, and cloud and network products. The pandemic period and in general the very tense geopolitical climate at a global level have probably influenced the market in question.
Concerns about Foxconn's financial health have been heightened by recent downgrades in Apple stock earlier in the week. Both companies seem to agree on the prospect of a decline in iPhone sales. Barclays analysts highlighted weakness in iPhone volumes and mix on Tuesday, while also highlighting the lack of recovery in Macs, iPads and wearables.
The downgrade had negative impacts not only on Foxconn's stock but also on other Apple suppliers, such as Taiwan Semiconductor Manufacturing Company, whose value decreased on Tuesday. Piper Sandler continued the downward trend on Thursday, expressing concerns about a possible build-up of cellphone inventories in the first half of 2024 and suggesting that growth rates may have peaked for unit sales.
In conclusion, Apple is not experiencing its best period
These developments have contributed to a 6% drop in Apple shares since the beginning of the year, highlighting significant challenges and uncertainties in the iPhone sales landscape and related industries. Investors and analysts are carefully watching how Apple will deal with this double challengetrying to manage antitrust pressure in the United States while simultaneously addressing concerns about sales prospects, especially after Foxconn's revenue contraction.
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