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Analysts Who Correctly Predicted Apple's Share Price Decline Reinstate Target Price
Here's what's next for Apple Inc. stock.
For years, one of the stock market's truisms has been to buy and forget Apple stock in an investment portfolio. This has paid off, given Apple's eye-popping 38,187% rate of return over the past two decades.
However, this "buy-and-forget" approach to Apple stock ownership is being put to the test in 2024.
Apple shares rebounded 21% from last October's lows to mid-December's highs, but since then they've been on a downward trajectory, dropping 9% this year alone, which stands in stark (and disappointing) contrast to the S&P 500's 8% gain.
Investors in Apple have lost interest in the stock for a number of reasons. Apple's lackluster sales in China against a backdrop of U.S.-China tech rivalry, and the company's lack of a clear strategy for profiting from artificial intelligence, have weighed on investor optimism.
That said, as one of the world's largest shareholders, the surprisingly poor performance of Gwen may still surprise many.
TheStreet Pro's Bruce Kamich is one analyst who isn't shocked by Apple's decline. Kamich, an analyst who has been evaluating markets and stocks for more than 50 years, told investors in January to "avoid going long" on the stock.
Carmichael recently updated his analysis of Apple stock, and given his previous prescient advice, investors may want to pay attention to what he thinks will happen next.
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Apple iPhone Loses Its Shine
In 2007, Apple, in association with its founder Steve Jobs, introduced the iPhone, which revolutionized the way we communicate and consume information, arguably ushering in the smartphone era.
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The iPhone became Apple's (AAPL) The most important product, with 2.3 billion units sold over the years and an estimated 1.4 billion units worldwide today.
The global popularity of the iPhone has brought revenue and profits to Apple. In Apple's fiscal first quarter ending in December, total iPhone revenue was $69.7 billion, accounting for $58% of Apple's $120 billion in sales. revenue from services, including the App Store, was $23.1 billion.
That's a lot of money, but with the "law of big numbers" in play, it's becoming increasingly difficult for Apple to deliver year-over-year growth. revenue in the December quarter was up just 2% from the same period a year earlier, the company's best growth in five quarters.
To make matters worse, much of this growth is due to easy comparisons caused by supply shortages, which reduced sales in the previous year. For the quarter ending March, Apple's guidance was lackluster.
"During last March quarter, we replenished our channel inventory to meet the large demand that had been suppressed by restrictions. We estimate that this impact added nearly $5 billion to total revenue in last year's March quarter," said Luca Maestri, matron financial officer, on last quarter's earnings call." When we exclude this impact from last year's revenue, we expect total company revenue and iPhone revenue for the March quarter to be similar to the same period last year."
This is not enough to satisfy growth investors and hardly justifies a high valuation premium as in the past.
Apple faces challenges from China and Artificial Intelligence.
The smartphone market is huge, but competition is fierce, especially in China, where the government is reportedly encouraging state employees and workers in sensitive industries to buy Chinese phones such as those made by Huawei and Xiaomi.
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China's economy is still struggling to emerge from the Covidien fog, and Chinese and U.S. officials are trading barbs over technology access, all of which has caught Wall Street's attention.
In January, Barclays Bank analyst Tim Long surprisingly downgraded Apple to "underperform."
"We continue to see weakness in iPhone sales and product sets, as well as a lack of rebound in Macs, iPads and wearables," Long said.
But it's not just China that has investors nervous. There is also a lack of understanding of Apple's artificial intelligence program.
In December 2022, OpenAI released ChatGPT, kicking off a surge in AI R&D. This has prompted many companies to develop AI strategies to profit from the growing popularity of generative AI applications.
Microsoft has been quick to incorporate ChatGPT into its search engine Bing, and after taking a stake in OpenAI, its Copilot service offers a wide range of ChatGPT-driven solutions for businesses and consumers. Alphabet, the parent company of Google, which is known for its Android smartphones, has gained a foothold in this emerging field with its large-scale linguistic AI model, Gemini, while Meta Platform, the parent company of Facebook and Instagram, has also entered the AI space with its LLM Llama. These companies are far from the only ones dipping their toes into the AI waters, but the big picture is clear. Everyone seems to have their own AI plans.
At least outside of rumors, Apple hasn't chimed in on the discussion.
Apple is reportedly working on Artificial Intelligence and Chief Executive Officer Tim Cook is notorious for keeping his research a secret. More recently, Apple is in talks with Google and Baidu to acquire LLM Ernie of Gemini and Baidu to power the next-generation iPhone, which will be announced later this year at the company's annual launch event, which usually takes place in September.
Even so, without any formal decision, investors are wondering whether Apple will miss the opportunity to gain an early foothold in an industry that thought leaders say could change everything.
Apple's Stock Chart Provides Insight Into What's Next
Carmichael is a technical analyst who has been using price, volume, and momentum activity for more than 50 years to gain insight into possible changes in stocks. His interpretation of technical indicators was the basis for his correct prediction in January that Apple's stock price could fall.
After the Apple sell-off, Carmichael updated his analysis of the Apple chart on April 11th. Unfortunately for shareholders, Camich remains concerned.
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"I'm seeing a double-top formation near $200. The stock has turned lower and is trading below a declining 40-week moving average," says Kamich." Over the past three months, the weekly (equilibrium volume) OBV line has weakened, and the MACD oscillator fell below the zero line in March, signaling an outright sell signal. Over the past three months, red candles (bearish) and upper shadow lines have appeared on the chart.
For Kamich to be bullish, he'd like to see equilibrium volume (basically a measure of up day volume minus down day volume) go up and the MACD go positive, indicating that the buyers have regained control of the market.
Carmichael also used a dot plot to calculate Apple's target stock price. These aren't very reassuring either. He used daily and weekly charts to calculate that Apple could reach $149 and $116, respectively.
Of course, the chart points and numerical targets are not guarantees, nor do they indicate when the target price will be reached. However, Kamich's bearish analysis shows that the relationship between risk and return is not optimistic.
As a result, investors may want to be cautious about Apple until they have a better understanding of the company's artificial intelligence program and investor sentiment improves.
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