- Wednesday, October 16, 2024
Apple Inc.'s stock is experiencing its fifth consecutive day of decline, dropping nearly 12% since the start of 2024. This downward trend comes at a time when the broader market is on an upward trajectory, leaving investors at a crossroads.
Challenges and Concerns
Rosenblatt Securities analyst Barton Crockett notes that Apple (AAPL) is facing various obstacles, including regulatory pressures, sluggish revenue growth, and a lack of innovative new products. This combination of factors has put the tech giant in a precarious position.
Mizuho analyst Jordan Klein suggests that the situation could worsen if Warren Buffett's Berkshire Hathaway continues to reduce its significant stake in Apple. Despite trimming his holdings by 1% in the previous quarter, Klein speculates that further selling may be on the horizon, potentially impacting the stock's performance.
Warren Buffett's Influence
As one of Apple's largest shareholders, Buffett stands to profit from his substantial investment in the company. However, given the negative sentiment surrounding Apple and the possibility of Buffett offloading more shares, Klein believes that retail investors could panic and sell off their holdings, driving the stock price down.
Recommendations for Investors
Klein advises Apple investors to consider diversifying their portfolios by exploring alternative hardware investments. He suggests looking into companies like Dell Technologies Inc., Western Digital Corp., and Silicon Motion Technology Corp. as potential opportunities.
Looking ahead, Klein anticipates that Apple's stock may underperform until the company unveils its plans for generative AI, expected to be showcased at the annual June WWDC developer event.
Stay tuned for updates on Apple's strategic direction and how it could impact its stock performance in the coming months.
Looking Ahead to Apple's AI Capabilities
Apple's AI Future
Rosenblatt’s Crockett is also looking ahead to that event. “If Apple can launch inspiring new AI capabilities, that could go some way to easing the current funk,” he said in a note to clients.
Generative Artificial Intelligence Announcement Anticipation
Chief Executive Tim Cook has teased a coming announcement on generative artificial intelligence, and many think that will come at WWDC. But it’s not immediately clear what Apple plans to do with AI.
Comparison in AI Development Spending
He pointed out that Facebook-parent Meta Platforms Inc. META, -1.36% spent $38 billion last year on research and development and forecasts $30 billion to $37 billion in capital expenditures this year, while Google-parent Alphabet Inc. GOOGL, -1.08% GOOG, -1.05% shelled out $45 billion for R&D in 2023 and is expecting to spend a “notably larger” amount on this year’s capex than last year’s $32 billion sum.
Apple, by contrast, spent $30 billion on R&D last fiscal year and outlaid $11 billion for capex.
“The portion of R&D and capex spend on AI is also probably much larger at Alphabet and Meta than Apple,” Crockett said.
Competitive Landscape in AI Subscription Sales
Given the relative scope of spending, he’s doubtful Apple will be able to compete against companies like Alphabet and Microsoft Corp. MSFT, -2.57% when it comes to generative AI subscription sales.
“We suspect Apple will have more success touting its AI processing power for apps from Microsoft and others, making AI’s value to Apple mainly in boosting iPhone and Mac sales,” he wrote. Case in point: Apple on Monday touted its new MacBook Air lineup as “the world’s best consumer laptop for AI.”
Crockett's Rating and Price Target
Crockett has a neutral rating and $189 price target on Apple’s stock.
More Posts
All Rights Reserved © 2024
Post a comment