On Tuesday, Apple experienced a nearly 3% decline in its shares after Barclays downgraded the tech giant’s stock to underweight and slightly adjusted its price target from $161 to $160. Analyst Tim Long expressed concerns about the lackluster sales performance of the iPhone 15, particularly in China, anticipating a continuation of weak sales with the iPhone 16 and across Apple’s hardware offerings.
Barclays highlighted ongoing weaknesses in iPhone volumes and mix, as well as a lack of recovery in Macs, iPads, and wearables. This assessment aligns with earlier observations of iPhone sales struggles in China, with reports suggesting informal guidance from the Chinese government against state employees using iPhones, a claim denied by Chinese authorities.
The downgrade anticipates a potential impact on Apple’s lucrative services business, citing expected deceleration in growth, partly due to regulatory scrutiny. While Apple CEO Tim Cook has noted “better-than-expected” growth in the services unit, Barclays questions the sustainability of this growth over the long term.
Analyst Tim Long raised concerns about potential regulatory challenges, referencing the upcoming initial determination on Google’s Traffic Acquisition Cost (TAC) in 2024. Additionally, investigations into app store practices could intensify, posing risks to Apple’s services segment.
This downgrade follows a broader trend of demand concerns for Apple, which has struggled with slowing demand since last year. The company’s performance in China has been a particular worry, exacerbated by the resurgence of local competitor Huawei.
As a result of the downgrade, Apple’s market capitalization is set to decrease by about $90 billion. Barclays shifted its rating from “neutral” to “underweight,” and the 12-month price target was adjusted downward to $160.
While Apple’s stock had seen a remarkable rise of nearly 50% in 2023, reaching a record high in mid-December, concerns about sustained demand and potential regulatory challenges have led to increased bearish sentiments. The average analyst rating for Apple remains “buy,” with a median price target of $200.