Apple stock has underperformed the market this year amid growing investor concerns. One Maxim Group analyst has more concerns about the iPhone maker.
Analyst Tom Forte initiated coverage on Apple with a “hold” rating and a price target of $178. This represents a 5% increase from Tuesday’s closing price, but a 4.1% decline from the stock’s start of the year.
Forte is the third analyst to give the company a hold rating this month, according to FactSet. Of the 45 analysts surveyed, 25 said the stock was a buy, 15 said it was a hold, and 5 said it was a sell.
“We are monitoring the following factors that could lead to AAPL’s demise (prolonged stock price weakness),” Forte said in a research note on Wednesday.
Apple stock is down 12% in 2024, compared to a 5.9% gain.
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Investors are digesting a trove of information that leaves uncertainty surrounding the once $3 trillion stock. For Forte, those uncertainties include the company’s ability to participate in the generative artificial intelligence race, dependence on China, and dependence on the performance of his one product: the iPhone.
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Unlike most big tech companies, Apple has yet to release any major updates regarding its plans to use generative AI. That’s weighed heavily on the stock this year after it rose nearly 45% in 2023.
Last year, investors bought up shares in members of the Magnificent Seven, hoping to get an early jump on the AI boom. Investors are now expecting Apple to announce more details about its AI at June’s Worldwide Developers Conference.
“We believe Apple has been caught off guard when it comes to identifying and capitalizing on trends in artificial intelligence early,” Forte wrote.
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Not all analysts agree. Wedbush’s Dan Ives said in a note earlier this month that “AI is finally coming to Apple,” and any announcements on this front could send the stock higher. He rates Apple a “buy” and has a price target of $250.
As for China, Forte wrote that Apple is “overly dependent” on China “from a sales and supply chain perspective.” Of Apple’s $383.3 billion in sales in 2023, about $72.6 billion came from China. But with China’s economy struggling and lower-cost competitors gaining market share, analysts expect sales in the region to reach $68.76 billion in 2024.
Forte is also concerned about the company’s reliance on the iPhone. iPhone sales were $200.5 billion, making it the largest contributor to Apple’s revenue in 2023. iPhone sales are always at risk as high inflation and interest rates continue to put pressure on consumers.
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Apple stock fell 0.4% to $168.75 on Wednesday. The S&P 500 fell 0.4%.
Email Angela Palumbo at angela.palumbo@dowjones.com.
