Apple stock sank to its lowest level of the year on Tuesday on news of weak iPhone sales in China. With the consumer electronics giant facing pressure on multiple fronts, one Wall Street trader is wondering how major investor Warren Buffett will respond.
Year to date, Apple stock is down nearly 12%. That compares with a gain of 6.5% for the S&P 500.
On Monday, Apple stock fell 2.5% after European Union regulators fined Apple about $2 billion for violating EU antitrust rules with its App Store policies.
On the stock market today, Apple stock dropped 2.8% to close at 170.12 on disappointing iPhone sales data out of China.
Market research firm Counterpoint Research reported that Apple iPhone unit sales fell 24% in China during the first six weeks of 2024 vs. the same period last year. Meanwhile, sales for China-based rival Huawei jumped 64%, Counterpoint said. However, overall smartphone sales in China slid 7% during the first six weeks of the year, the research firm said.
Counterpoint analyst Mengmeng Zhang said Apple is facing stiff competition in the premium smartphone segment in China from a resurgent Huawei with its Mate 60 series devices. Plus, Apple is getting squeezed in midrange handsets from aggressive pricing by domestic vendors Oppo, Vivo and Xiaomi, Zhang said in a report.
Apple Stock Sentiment Called 'Dismal'
Also Tuesday, Foxconn, the Taiwan-based contract manufacturer that assembles iPhones, said its February sales fell 12% from a year earlier, indicating slower sales for Apple products.
Wedbush Securities analyst Daniel Ives said sentiment in Apple stock is "dismal" as the company misses out on the AI revolution that is enthralling Wall Street now.
News of weak iPhone sales in China follows Apple's decision to end development of an autonomous electric car after a decade of work. Apple reportedly spent more than $10 billion on the Apple car project before shutting it down last week to focus on artificial intelligence.
In a client note, Ives reiterated his outperform rating on Apple stock with a 12-month price target of 250.
Ives said he thinks sentiment in Apple stock will improve around the company's Worldwide Developers Conference in June. Apple is likely to discuss its AI innovations at WWDC, he said.
"Right now the data points are not roses and rainbows for Apple and headline risk remains in the name," Ives said. "However, our view is all about navigating this next 1-2 quarters and getting on to the other side of easier comps, AI announcement at WWDC, stronger upgrade cycle for iPhone 16, and the monetization opportunity of the golden installed base (of iPhone owners)."
Will Warren Buffett Sell Apple Stock?
Elsewhere on Wall Street, Jordan Klein, managing director for tech, media and telecom sector trading at Mizuho Securities, wondered what Warren Buffett will do with his firm's huge stake in Apple.
In a client note, Klein wrote, "What happens to AAPL sentiment and the stock price when/if we learn Uncle Warren is selling down his massive stake? My guess is the stock gets slaughtered."
Buffett's holding company Berkshire Hathaway owns a nearly 6% stake in Apple, or 905 million shares.
"He is up a ton on his stake, and given it is one (if not his biggest) single equity position and feels in trouble, I could see him selling sooner or later," Klein said. "In fact, I would not be surprised if he is selling right now. He knows when that (SEC form) 13F comes out showing he started to sell, that AAPL shares will get killed as retail investors rush for the exit."
The next 13F from Berkshire, showing its holdings as of the end of the first quarter, is due around May 15, Barron's reported.
AI News Could Boost Apple Stock
Apple's luster has dimmed as an innovator after ending its Apple car project and releasing a "not-yet-ready-for prime time Vision Pro" computer headset, Rosenblatt Securities analyst Barton Crockett said in a client note.
Apple will need to introduce some impressive generative AI innovations to regain some of its previous sheen, Crockett said. He rates Apple stock as neutral with a price target of 189.
"If Apple can launch inspiring new AI capabilities, that could go some way to easing the current funk," he said.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
