Apple's Road Ahead Analysts say new products and diversified revenue streams will be key to Apple's stock price

Slower growth. Competition intensifies. Expanding scrutiny.

Apple's image in China and among investors is in tatters, and the company's former favorite has been eclipsed. So far this year, the tech giant's shares are down 8.5% and its market capitalization has shrunk by more than $300 billion, underperforming the Standard & Poor's 500 and the Nasdaq Resonance 100 indexes.

However, it was not all doom and gloom. Analysts say the share price correction has made Apple's valuation more attractive, and it's not impossible for the company to come back with new products that will wow the world.

Apple's stock is now down 14% from its December high of $198.11, while the S&P 500 has risen 10% and the Nasdaq Resonance 100 has risen nearly 9% over the same period.

Needham analyst Laura Martin told Yahoo Finance Live that a series of factors such as low demand for iPhones, intensified competition from China, and increased scrutiny from the government have made investors uneasy.

The mounting hurdles have prompted several of Martin's peers to become even more bearish on Apple stock in the near term. Goldman Sachs removed Apple from its Conviction List last month, and companies like Barclays, Piper Sandler and Redburn Atlantic have also downgraded Apple's stock for 2024. Atlantic, among others, also downgraded Apple's 2024 stock rating.

Earlier this week, Loop Capital analyst Ananda Baruah cut his price target for Apple from $185 to $170 and lowered his earnings estimates, writing in a client note that sluggish demand, "weak fundamentals" and competition from Huawei and Xiaomi were having a "material impact". Competition from Huawei and Xiaomi is having a "material impact", he wrote in a customer note.

"iPhone shipments are just too weak," Baruah wrote." We currently believe that Wall Street's iPhone unit shipments and revenue [expectations] are likely to be higher than 20%, while Wall Street's overall revenue and EPS [expectations] are likely to be higher than 10%."

Barua expects Apple's annual revenue and earnings to decline in 2024-something that hasn't happened since 2016.

According to Counterpoint Research, iPhone sales in China fell by 24% in the first six weeks of the year, with Apple's market share dropping below 16%. Chinese smartphone maker vivo accounted for the largest market share in the country with 17.6%, while Huawei and Glory devices accounted for 16.5% and 16.3% respectively. Chinese smartphone maker vivo accounted for the largest market share in the country with 17.6%, while Huawei and Honor devices accounted for 16.5% and 16.3% respectively.

TECHnalysis Research's Bob O'Donnell told Yahoo Finance Live that Apple will have a challenging road ahead, as the region contributed nearly a fifth of the tech giant's overall revenue in the most recent quarter.

"I think the next couple of quarters are going to be tough," O'Donnell said." I hope Apple pulls a rabbit out of its hat. It's done it in the past, and I don't believe it can't do it now."

While Wall Street's enthusiasm is waning, now may be the time to bet on Apple, as Piper Sandler Simmons technical analyst Craig Johnson tells Yahoo Finance Live that the recent selloff has put Apple's shares at a discount, making its risk-response setup more attractive.

"Apple looks like an attractive place for people to park their money at this time because it has a good balance sheet, a highly repeatable business model, good margins, and they're buying back a lot of stock," Johnson explained.

In addition to a solid balance sheet, several analysts remain confident in the company's ability to regain momentum, with the Vision Pro headset and anticipated AI program, as well as other revenue streams, including a potential advertising push, largely touted as micro drivers of future revenue growth.

"Maybe demand in China has slowed down," Martin said, "but China already has a very affluent population using their ecosystem, so they need to increase advertising to drive revenue growth." Apple needs to find a way to add more services and software, which will lead to more subscription revenue and higher revenue per device.

Martin is one of the few analysts who maintains a buy rating on Apple. Bloomberg data show that at the beginning of the second quarter, just over half of analysts rated Apple stock as a buy. That makes Apple the second most underappreciated stock in the Gorgeous 7 after Tesla.

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