Apple, Inc. AAPL faced a challenging week with the looming threat of competition from Huawei and a limited ban in China, just ahead of its much-anticipated “Wonderlust” iPhone 15 launch event.
A Forgettable Week: Apple’s stock had been on an upward trajectory since the lackluster performance in 2022, gaining momentum until July this year.
However, like many other tech stocks, it faced a period of weakness as sentiment towards growth stocks soured, driven by expectations of further rate hikes by the Federal Reserve.
A higher interest rate environment, especially detrimental to consumer-focused tech companies like Apple, often prompts buyers to hold back on discretionary purchases. Additionally, investors tend to shift their preferences towards safer investments like treasuries, seeking their safe-haven appeal and attractive returns.
The stock hit a low point in late August but was showing signs of recovery, bolstered by positive expectations surrounding the upcoming iPhone 15 launch event. It was precisely at this juncture that a double blow struck the stock hard, resulting in a significant 6.4% pullback on Wednesday and Thursday, causing a staggering $189.8 billion loss in market capitalization.
Chart Courtesy of TradingView
See Also: Everything You Need To Know About Apple Stock
Mixed Views: The sell-off in Apple shares is seen by some as a knee-jerk reaction. Apple bull and Wedbush analyst Daniel Ives downplayed the China news, estimating that the government ban would impact a maximum of around 500,000 iPhones. He pointed out that Apple is a major employer in China, considering its extensive supply chain partnerships within the country.
Deepwater Asset Management‘s Gene Munster shared a similar perspective, suggesting that the ban might reduce iPhone sales by 2% and overall revenue by 1% in 2024.
On the other hand, BofA‘s Wamsi Mohan expressed concerns about a potential 5 million to 10 million-unit headwind for Apple due to the ban. He also highlighted the competition posed by Huawei, emphasizing that if Huawei reclaims 10 million units from Apple in China, it could lead to an EPS headwind of $0.11.
Huawei’s recent success with the Mate 60 Pro, which sold out within hours of preorders opening, adds to the competitive pressure.
Uncertainty Ahead: Looking ahead, Apple’s stock typically experiences gains leading up to an iPhone launch event, followed by a pullback after the event. Here’s how that trend has fared over the past five years.
While some attribute this to the “buy-the-rumor, sell-the-news” phenomenon, others point out that recent iPhone releases have not introduced significantly groundbreaking features, potentially leading to post-launch disappointment.
Apple is expected to continue its strategy of prioritizing value over volume, focusing on enhancing high-end models with compelling features. This approach aims to appeal to consumers in a global economy marked by macroeconomic risks.
However, it’s important to note that China remains a pivotal component of Apple’s growth narrative, serving as both a major supplier and market for its products. Therefore, market participants and analysts will closely monitor developments in this crucial market.
Closing Note: On Friday, Apple’s stock closed with a 0.35% gain, reaching $178.18, according to data from Benzinga Pro.
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Photo courtesy: Apple
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