On Tuesday, Apple experienced a significant decline of nearly 3.6%, reaching a seven-week low, following Barclays’ decision to downgrade the shares of the world’s most valuable company. Concerns were raised by Barclays regarding the anticipated weakness in demand for Apple’s devices, ranging from the iPhone to the Mac, throughout 2024.
Barclays becomes the second brokerage firm to assign the equivalent of a “sell” rating to Apple’s stock, contributing to the company’s highest number of bearish recommendations in at least two years, as indicated by LSEG data. Given that Apple constitutes a substantial 7% of the S&P 500’s market weight, the broader index experienced a 0.56% decline on Tuesday. Notably, Apple had a remarkable 2023, with a nearly 50% increase in its stock value and reaching a record high in mid-December, contributing to Big Tech’s dominance in the markets.
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The decline in Apple’s performance has been evident since early last year, with the company grappling with a demand slowdown. Additionally, the outlook for the holiday-quarter sales has fallen below Wall Street estimates. Concerns about Apple’s position in China have also arisen, particularly with the resurgence of local competitor Huawei.
Barclays analyst Tim Long expressed reservations about the iPhone 15 and anticipated a similar lackluster performance for the iPhone 16. He pointed to weaknesses in China and subdued demand in developed markets as contributing factors. Long, with a four out of five stars rating for recommendation accuracy on Apple, highlighted the mounting risks for Apple’s services business, particularly scrutiny over app store practices in countries such as the United States.
Apple’s services business, which has often outpaced hardware growth, accounts for nearly a quarter of the company’s total revenue. The stock decline on Tuesday resulted in the erosion of over $100 billion from Apple’s market capitalization, with the closing shares at $185.64. Barclays downgraded the stock from “neutral” to “underweight” and adjusted its 12-month price target to $160, down by $1. Prior to this downgrade, Itau BBA’s “sell” rating was the sole bearish recommendation on Apple since July 2022.
Despite the recent challenges, analysts, on average, continue to rate Apple as a “buy,” with a median price target of $200. However, the company’s current valuation at approximately 28.7 times its 12-month forward earnings estimates is notably higher than the S&P 500’s 19.8. The market reaction reflects growing concerns about Apple’s future performance and its ability to sustain growth in the highly competitive tech industry.
