Does Apple’s Lacklustre Sales Performance Make its Stock Too Rotten for Investors?

There are few Wall Street performers as relentlessly innovative and impressive as Apple, but following a 3.3% slide and analyst downgrades, is AAPL no longer ripe for picking up and adding to investor portfolios?

Apple’s challenging start to 2024 occurred when Barclays downgraded the tech giant’s stock to ‘underweight’, slightly trimming the stock’s price target from $161 to $160.

The news came as a result of anticipated “lackluster” iPhone sales for the firm’s iPhone 15 model, with little optimism for fresh innovations packed into the upcoming launch of iPhone 16, scheduled for Q3 2024.

“We are still picking up weakness on iPhone volumes and mix, as well as a lack of bounce-back in Macs, iPads and wearables,” explained Barclays analyst Tim Long.

With unconfirmed reports from Bloomberg of the Chinese government forbidding state employees from using iPhones, amid other general instances of more widespread regulatory scrutiny, it’s clear that the outlook for Apple has suffered a blow in recent months.

Apple’s status as an underweight stock means that the tech giants have now picked up five sell or equivalent ratings from analysts, according to Bloomberg data. With 34 buy ratings and 14 holds, AAPL’s stock recommendation consensus now stands at 4.08 out of a possible five, representing the Apple’s worst aggregated rating since October 2020.

This comes despite the stock’s exceptional consistency even in the face of post-pandemic supply chain issues and widespread inflationary pressures.

Apple climbed 50% in the calendar year 2023 and even briefly surpassed a market capitalization of $3 trillion as investors remained bullish about Apple’s prospects despite inflationary pressures on consumers.

Addressing Apple’s Sales Shortfall

While Apple reached new heights in 2023, its stuttering start to 2024 may offer a taste of reality for the tech giants as sales slowed to their lowest rate for more than a decade for smartphones among a range of product shortfalls.

For the first time since its 2010 launch, Apple opted against releasing new iPad models in 2023. Sales for iPads slipped 15% for the fiscal year 2023 according to Bank of America analyst Wamsi Mohan, while revenue dropped 3.4% to $28.3 billion.

Likewise, sales of Mac PCs and laptops fell almost 27% to $10.2 billion in fiscal 2023, while Bank of America estimates suggest that unit sales contracted by 11%.

In addition to this, an intellectual property dispute over the Christmas period saw new Apple Watch models removed from Apple stores, with Morgan Stanley analysts estimating that the firm lost around $135 million in sales each day as the issue rumbled on.

Is Apple Still the Stock it Once Was?

There’s no doubt that AAPL is a Wall Street star. Boasting more than 20,000% growth since the start of the century, Apple has cemented itself as a key member of the FAANG collective of leading US tech stocks.

However, recent struggles have highlighted that no stock is immune to the pressures of economic headwinds and falling consumer spending power.

While Apple has made a disappointing start to 2024, investors can seek solace in that sentiment surrounding the stock is still high on a more long-term basis.

Perhaps Apple’s biggest stock market boost can be found in Warren Buffett’s unwavering faith in the stock, with as much as 47.9% of Berkshire Hathaway’s portfolio concentrated on AAPL. This extremely heavy emphasis on Apple underlines the stock’s impressive record of securing growth even in the face of challenging economic conditions.

Many market analysts have highlighted Apple’s ability to woo consumers with innovative new products that offer greater power, functionality, and efficiency than its competitors. While sales of the iPhone, Apple Watch, and Mac computers have all struggled in recent months, fresh optimism is growing for the new Apple Vision Pro, which could be transformative for the firm in the new year.

“The sales momentum for Apple is expected to continue into early 2024 with the much-anticipated release of the Vision Pro mixed reality headset,” explained Maxim Manturov, head of investment research at Freedom Finance Europe. The Vision Pro headset, unveiled in June of this year, is Apple's first entirely new product in a decade, and market expectations suggest it could become a bestseller.”

This, accompanied by the expectation that Apple will enter the race to harness the power of generative AI in 2024 serves as a timely reminder that the tech giants are often seeking to bring the next big thing to market faster than other industry players.

Should Investors Buy Apple Stock?

Apple’s short-term prospects rely heavily on the return of consumer spending power and their product innovations to sustain AAPL’s status as a leading tech stock. With this in mind, the tech firm’s 2024 performance could be defined by how well-received the Vision Pro is among consumers.

Given that spatial computing is an industry that’s relatively new to consumers, the Vision Pro’s success is far from assured. But what we can be confident of is that Apple will continue to show long-term growth that falls in line with its impressive outperformance throughout the 21st Century.

Historically speaking, Apple’s sales shortcomings only tend to serve as a temporary period of weakness. AAPL often presents itself as a stock that’s ripe for picking and holding over a long-term basis.