01/13/2024 – 7:00
Apple's stock took five trading sessions to have its first positive day in New York, last Monday. Halfway through, it had its recommendation downgraded by at least two houses and lost almost US$200 billion in market value, amid uncertainty about the future in China, signs of weakening sales and growing legal risks in the United States.
Despite this, there are still signs of opportunity on the horizon for the most valuable publicly traded company on the planet. FactSet estimates that, on average, analysts classify the stock as “overweight” (buy) and project a target price of US$197.53, a premium of more than almost 7% compared to the close on January 9th. Even so, the asset accumulated a depreciation of 5% in a period of one month, while the Nasdaq index had appreciated by more than 3% at the end of this text, on January 10th.
The relative lack of interest among investors in the Silicon Valley giant at the beginning of 2024 is a reflection of a confluence of factors. Many of them have been going on since mid-2023, as is the case with the growing Chinese siege on the American company's systems. In recent months, the Asian country has extended the ban on the use of iOS to public administration employees, beyond the first level. The group does not represent a relevant portion of the customer base, but the fear is that the measures anticipate a harsher campaign against Apple.
The scenario amplifies the challenges in attempts to expand in the Chinese market, where competition with Huawei intensifies. In September, the Chinese company launched a smartphone with characteristics similar to its North American rival's most advanced devices, which sparked speculation that Beijing may have contributed to access to technologies blocked by sanctions imposed by Washington.
The risks, however, extend beyond the context of demand. On Friday the 5th, a report from the The New York Times revealed that the United States Department of Justice (DoJ) is in the final stages of an investigation into possible anti-competitive practices by the apple company. The investigation could culminate in an antitrust lawsuit in the first half of this year, according to the newspaper.
Faced with these headwinds, Barclays cut its recommendation for the stock, from “neutral” to “underweight”, and lowered the target price from US$161 to US$160. According to the bank's analysis, the most recent data points to sales weakened features of the iPhone 15, the latest release in the company's most popular product line. “Our initial view of the iPhone 16 is that there will be little difference between features and functions compared to the iPhone 15,” he says. “Without any compelling changes, we see less room for device upgrades [por consumidores]especially in a challenging macro environment”, he adds.
Piper Sandler also downgraded its outlook for Apple's stock, from “neutral” to “underweight”, given what it expects to be a slowdown in cell phone sales and service revenue growth. Analysts Harsh Kumar and Robert Aguanno believe that the loss of momentum in China's economy will also contribute to the challenging environment.
US$4 trillion in cash
On the other hand, analyst Daniel Ives, from Wedbush Securities, remains optimistic about the prospects for the American giant, despite what he calls “noise” coming from China.
In his view, by the end of this year, Apple should become the first publicly traded company on the planet to reach a market value of US$4 trillion. Ives projects 250 million iPhone units sold throughout the full year of 2024. “With a booming iPhone business again in 2024, just after the start of what we consider a new 'bull' market [altista] of technology, Apple is prepared to have a strong year ahead”, he highlights.
In an equally positive point of view, Evercore analysts consider the recent pessimism regarding iPhone demand exaggerated, because they understand that weakness in China will be offset by strengthened performance in other countries.
They recognize that antitrust lawsuits are a risk, but consider that these actions usually last several years. “Regardless of the result, it will take years before there is any financial impact for Apple”, they highlighted, according to a note revealed by Dow Jones Newswires.
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