On the first trading day of the year, Apple faced a setback as its stock fell 3.6%, impacting the overall US stock market and hindering the strong performance of Big Tech in 2023. The decline was prompted by Barclays downgrading Apple’s stock to “underweight” from “equal weight,” with a revised price target of $160, down from $161. The downgrade was based on disappointing sales of the iPhone 15, particularly in China, and concerns about weak results in Macs, iPads, and wearables.
Analysts noted ongoing weakness in iPhone volumes and mix, along with a lack of recovery in other Apple product lines. The downgrade also highlighted the unsustainable nature of Apple’s recent period of weak results combined with multiple expansion. The softening demand for the iPhone 15, attributed to limited new features and decreased incentive for upgrades, contributed to the negative outlook.
Barclays’ analysts also expressed concerns about Apple’s services business, including Apple TV+ and Apple Music, anticipating a slowdown, partly due to increased regulatory scrutiny. This downgrade is relatively uncommon for a company of Apple’s prominence, and it follows a challenging period, including the temporary removal of advanced Apple Watch models from the US market due to a patent violation.
The broader market was impacted as Apple’s stock decline led to a 0.6% drop in the S&P 500 and a 1.6% fall in the Nasdaq Composite indexes. Despite these challenges, Apple had a strong performance in 2023, with a 48% surge in its stock. However, some investors anticipate a potential shift in market dynamics in 2024, with attention turning to stocks that could perform well if the economy reaccelerates and amid speculation of a Federal Reserve interest rate cut. This could lead to declines in big tech names as investors diversify their portfolios.
