Apple Shares Recover After Initial Loss on Subdued Holiday Quarter Forecast

On Friday, Apple shares rebounded after initially slipping due to the company’s prediction of a lackluster holiday quarter. The decline was tempered by a positive US jobs report, which sparked optimism about a potential pause in Federal Reserve interest rate hikes.

In early trading, Apple’s stock was down by 1.5 percent, following a drop of more than 3 percent before the opening bell. The world’s most valuable company was at risk of losing $40 billion (approximately Rs. 3,32,630 crore) in market value if the losses persisted.

Apple had recently forecasted sales for the holiday quarter, typically its most significant period, which fell below Wall Street’s expectations. The company attributed this to weak demand for iPads and wearables. This projection raised concerns about broader holiday demand, especially as estimates from organizations like the US National Retail Federation and Deloitte pointed to the slowest sales growth in years during this vital shopping period due to persistent inflation.

“Apple’s revenue growth has stagnated over the past few quarters, and it seems likely to continue to stagnate in the coming year,” noted brokerage firm Bernstein, emphasizing the importance of the holiday quarter in setting the tone for Apple’s fiscal year, which runs until September.

Nevertheless, Apple’s stock found support after reports indicated that nonfarm payrolls increased less than expected in October. This led to a rise in shares across various sectors, as investors believed it might prompt the Federal Reserve to halt its cycle of interest rate hikes.

Approximately 14 analysts lowered their price targets for Apple, bringing the median price target to $195, as per LSEG data. Apple currently trades at nearly 26 times its 12-month forward earnings estimates, a figure among the lowest within the group of so-called “Magnificent Seven” stocks.

DA Davidson analyst Tom Forte commented, “We view management’s flat sales guidance as proof that the company cannot rely on iPhone sales, as it has in the past, to drive shares higher.”

While the iPhone remains Apple’s primary revenue source, it witnessed sales growth in the September quarter and is projected to continue that trend in the final quarter of 2023. CEO Tim Cook reassured that iPhone 15 models were performing well in China, allaying concerns on Wall Street about Apple losing market share to resurgent Huawei and other local smartphone brands. “In mainland China, we set a quarterly record for the September quarter for iPhone,” Cook stated.

Many analysts reacted positively to these statements, with Wedbush Securities analyst Dan Ives remarking that “The Street will breathe a sigh of relief on this front.”