Apple Inc., a titan in the tech industry, encountered a rocky start to the new year, experiencing a slide of up to 4% following a downgrade to “underweight” by Barclays. This adjustment to Apple’s outlook sets a concerning tone for investors, signaling potential headwinds for the company’s stock value.
Barclays’ new price target for Apple stands at $160, implying a significant 17% decrease from the previous closing price of $192.53. This cautious stance, the first downgrade by the bank since 2019, stems from a prediction of underwhelming performance in iPhone 15 sales, particularly in the crucial Chinese market. Analyst Tim Long, leading the Barclays team, highlighted this concern in their recent analysis note.
Long pointed out that while Apple’s array of products like Macs, iPads, and wearables have also shown signs of stagnation, the iPhone, which constitutes approximately half of Apple’s revenue, remains a critical factor. With iPhone sales showing signs of faltering, the company has witnessed subpar growth in five of the past six quarters, a trend that may well continue with the upcoming iPhone 16, which isn’t expected to offer significant upgrades over its predecessor.
Barclays anticipates that the broader economic context will likely lead to longer hold times for devices, suggesting a reversion to the mean in the next two years. This forecast contradicts the more optimistic views of some strategists who envision Apple becoming the world’s first $4 trillion company. Despite an impressive 53% growth in 2023 and a staggering market cap that recently surpassed $3 trillion, Apple’s stock valuation faced a dip to $2.88 trillion following Tuesday’s decline.
The crux of Barclays’ argument hinges on the belief that Apple’s product innovation has plateaued. With fewer groundbreaking products or services on the horizon, Long suggests that sustaining growth will become increasingly challenging for the tech giant. Despite Apple’s robust ecosystem, which has transitioned from being Mac-driven to iPhone-driven over the past decade, the absence of compelling new offerings may dampen its growth prospects in the coming years.
Investors and Apple enthusiasts alike will be closely monitoring the company’s performance, particularly as it navigates through these predicted challenges. While Apple’s history of resilience and innovation is noteworthy, Barclays’ analysis serves as a reminder of the volatile nature of the tech industry and the high stakes involved in maintaining a leading edge.