Apple Stock Stumbles on AI and iPhone Concerns

[MongiIG]

Apple’s recent stock weakness marks a divergence with other members of the Magnificent 7 and the broader Nasdaq 100.

Source: Bloomberg

 

Indices Shares Apple Inc. Artificial intelligence Price iPhone

Written by: Chris Beauchamp | Chief Market Analyst, London

 

Publication date: Friday 01 March 2024 13:26

AI Efforts in Question

Apple's stock fell below $180 on Thursday for the first time since early-November, underperforming the broader market. While the S&P 500 and tech-heavy Nasdaq indices posted solid gains, Apple shares slipped around 1%.

Source: Google Finance

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).

Source: LSEG

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

Source: TradingView

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.

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.