Apple Stock Stumbles on AI and iPhone Concerns
Apple’s recent stock weakness marks a divergence with other members of the Magnificent 7 and the broader Nasdaq 100.
The decline comes as doubts loom about Apple's artificial intelligence (AI) initiatives. Rivals like Microsoft are delivering strong earnings growth tied to burgeoning AI technology. This was highlighted by Tuesday's report that Apple is discontinuing its decade-long electric vehicle project. Back in 2017, Apple CEO Tim Cook called the autonomous car endeavour the "mother of all AI projects."
Stock Underperforms Broader Market
So far in 2024, Apple shares have dropped 3%, trailing the S&P 500's 7% gain and the Nasdaq's 9% climb. Despite its long-term market-beating returns, Apple has recently lagged the S&P 500 on 6-month, 1-year, and 2-year timeframes, according to FactSet data.
After spending most of 2021 to 2023 as the world's most valuable public company by market capitalization, Apple surrendered that crown to Microsoft in January. Microsoft's sales and profit growth have far outpaced Apple's, which posted negative growth in its 2022 fiscal year ending last September.
AI Investment Hints but Details Lacking
At Wednesday's shareholder meeting, Cook suggested Apple is "investing significantly" in generative AI. He said more specifics will be announced later this year. UBS analyst David Vogt predicts Apple's first major AI launch will come in June at its annual Worldwide Developers Conference.
iPhone Sales Weakness Looms
In addition to AI uncertainties, expectations for weak iPhone sales growth continue to weigh on Apple. iPhones accounted for 58% of Apple's total revenue last quarter.
Some See Positives in Car Project Halt
Some analysts see a silver lining in the halt of Apple's electric car plans. It enables the company to refocus AI talent on nearer-term products with greater market potential. To Morgan Stanley, it also shows Apple's "cost discipline."
Apple analyst rating
LSEG (formerly known as Refinitiv) data shows a consensus analyst rating of ‘buy’ for Apple with 10 strong buy, 17 buy, 13 hold and 2 sell – and a mean of estimates suggesting a long-term price target of $201.41 for the share, roughly 16% higher than the current price (as of 1 March 2024).
Technical outlook on the Apple share price
The Apple share price continues to precariously weigh on its $180.30 to $179.25 support zone which consists of the January-to-February lows.
A fall through and daily chart close below this area looks increasingly likely and would lead to levels being reached which were last traded in early-November with the 3 November low at $176.65 representing the first downside target.
Apple Daily Candlestick Chart
Further down sits the $174.49 August low below which key support can be spotted between the September and October lows at $167.62 to $165.67.
Were the $180.30 to $179.25 support zone to hold, though, a rise and daily chart close above last week’s high at $185.04 would need to occur, for a recovery off the support area to gain traction. In this scenario the Apple share price would trade back above its 200-day simple moving average (SMA) at $183.90 and target the 55-day SMA at $188.50.
This will continue to favour a fall through support at $179.25 to take place as long as the Apple share price continues to trade below last week’s high at $185.04.
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