Apple Shares Decline 4% Following Barclays Downgrade and Sales Concerns

On Tuesday, Apple shares experienced a 4% decline after Barclays downgraded the stock to "underweight" and marginally adjusted its price target from $161 to $160. Barclays analyst Tim Long expressed concern about the "lackluster" sales of the iPhone 15, particularly in China, indicating a potential continuation of weak sales for the upcoming iPhone 16 and other Apple hardware products.

In a note to clients, Long mentioned ongoing weaknesses in iPhone volumes and mix, alongside a lack of recovery in sales for Macs, iPads, and wearables. This observation aligns with concerns raised by analysts and investors dating back to October, with specific attention to diminished iPhone sales in China. While previous reports suggested informal guidance from the Chinese government against state employees using iPhones, the government has denied issuing such directives.

Long also anticipates a slowdown in the growth of Apple's lucrative services business, citing regulatory scrutiny as a contributing factor. Although Apple CEO Tim Cook had reported "better-than-expected" growth in the services unit, Barclays questions the sustainability of this growth in the long term.

Looking ahead to 2024, Long highlights potential challenges for Apple's services business, citing an upcoming determination on the Google Traffic Acquisition Cost (TAC) and the possibility of intensified app store investigations. The reference to Google TAC pertains to the payments made by Google to Apple to maintain its default search status on Safari. Google CEO Sundar Pichai confirmed the payment of 36% of Safari search revenue to Apple. Regulatory authorities are scrutinizing both Apple and Google regarding their default search status.

As Apple faces these challenges, market observers are closely monitoring the company's performance and the impact of regulatory developments on its various business segments.