Apple’s shares saw a minor decline in early Friday trading, affecting their modest one-month gain. This movement followed a significant rating adjustment by a prominent Wall Street analyst and continued weak sales data for the iPhone 16 from China.
Earlier in the year, Apple introduced its delayed AI strategy, aiming to use the recently launched smartphone as a gateway to expand its presence in the emerging technology sector. The company plans to implement this technology for its 1.4 billion global users in the coming years.
Initial feedback on the iPhone 16’s demand has been lukewarm, with some consumers hesitant to purchase the higher-end versions. Many are opting to wait for the release of new AI features before upgrading their devices. Apple is expected to introduce its first Apple Intelligence features later this month with the release of the new iOS 18.1 operating system on October 28. This update will be available for iPhone 16, iPhone 15, and iPhone 15 Pro users.
Apple is facing challenges in China, one of its most important markets and the world’s largest in terms of smartphone sales, according to data from research group IDC published earlier Friday. The data indicates that Apple’s sales in China dropped by 0.3% over the past three months compared to the same period in the previous year. Meanwhile, Huawei, backed by the Chinese government, saw a 42% increase in sales.
Despite maintaining its position as the second-largest vendor in China, ahead of Huawei and behind Vivo, Apple’s overall sales decline in a recovering smartphone market could raise concerns for investors, particularly as the holiday season approaches in western economies.
KeyBanc Capital Markets analyst Brandon Nispel suggested that there is an overly optimistic investor outlook for Apple as they head into the final months of the year. He downgraded Apple’s rating to ‘underweight’ from ‘sector weight’ and set a $200 price target on the company, citing aggressive assumptions about 2025 revenue growth.
Nispel noted that Apple has only increased revenues across all product categories twice in the past two decades, achieving growth in all five global regions only three times in the last twenty years. Furthermore, a survey indicated higher than anticipated demand for the more affordable iPhone SE 4, which is expected to launch next year at a $400 discount compared to the iPhone 16.
Recent reports from U.S. wireless carriers, such as Verizon, AT&T, and T-Mobile, indicate a 9% year-on-year decline in upgrade rates, which could negatively impact Apple’s sales in the world’s largest economy. KeyBanc projects that upgrade rates will continue to decrease in the fourth quarter and early next year, primarily because Apple Intelligence initially rolls out in English and only in the U.S., potentially putting other markets at a disadvantage.
Apple plans to release its fiscal fourth-quarter earnings next Wednesday, with projected earnings of approximately $1.55 per share on revenues of around $94.4 billion. Apple shares fell by 0.95% in premarket trading, indicating an opening price of $228.38 each.
