Apple's Stock in Freefall: Witnessing its Biggest Drop in 4 Months, $110B Wiped Off

Apple faced a substantial setback on Tuesday as its stock witnessed a staggering $110 billion loss in market capitalization. This marks its most significant drop in four months. 

The abrupt decline follows a remarkable 50% surge that propelled the tech giant to a historic peak in 2023. The drop, triggered by an unusual downgrade from Wall Street, led to a 3.65% plunge in the stock, emphasizing the magnitude of the financial setback for the company.

Barclays analyst Tim Long delivered an unexpected blow by assigning Apple an “underweight” rating, attributing it to weak demand for iPhones. Long anticipates a potential 13% decline in Apple’s shares over the next year, setting a target of $160. This rating stands out, as the vast majority of Wall Street forecasters – 40 out of 44 – have given Apple a “hold” or better rating, according to data from FactSet.

Concerns Over iPhone Sales

Long cited lackluster sales of the iPhone 15, especially in China, where the product reportedly faces restrictions due to security concerns. Additionally, he expressed reservations about the forthcoming iPhone 16, set to launch in September, foreseeing weaker-than-expected sales, stating, “We see no features or upgrades that are likely to make the iPhone 16 more compelling.”

While Barclays’ downgrade played a role in Tuesday’s stock decline, other factors are contributing to the challenges faced by the tech giant. Having witnessed Apple’s shares surge nearly 50% the previous year, investors may be reallocating capital at the start of the new year. Louis Navellier, founder and chairman of Navellier & Associates, suggested, “The new year brings tax-motivated postponed gain-taking and repositioning by portfolio managers.”

Apple’s decline aligns with broader weakness in the Nasdaq Composite, which fell 1.6% on Tuesday. Investors are grappling with the potential impact of rising geopolitical tensions, including the Israel-Hamas conflict and Houthi rebel attacks on Red Sea shipping. The resulting disruptions to the supply chain, coupled with surging oil prices, could lead to stickier-than-anticipated inflation, prompting the Federal Reserve to maintain high interest rates, thereby affecting growth-focused tech stocks.

Concerns about dwindling iPhone demand have been evident for some time, especially considering iPhone sales constituted nearly 50% of Apple’s total revenue in the third quarter of 2023. UBS analyst David Vogt warned of “soft” iPhone 15 sales in critical regions, such as China and India, with U.S. iPhone sell-through falling almost 13% year-over-year in November.

Regulatory Challenges: Implications for Apple

In addition to market challenges, regulatory hurdles are impacting investor sentiment. Ongoing investigations into Apple’s app store practices in the U.S. and EU threaten the company’s $85 billion services business. The recent U.S. antitrust trial revealed Google’s substantial payments to maintain its default search engine status on Apple’s devices.

As 2024 unfolds, the regulatory landscape may pose further challenges for Apple as investigations into app store practices intensify. Analyst Tim Long highlighted the forthcoming U.S. court decision on Google’s payments to Apple, emphasizing potential implications for the tech giant.

Gene Munster, managing partner at Deepwater Asset Management, emphasized the changing landscape regarding antitrust risks, warning investors to take these concerns seriously. As high-profile cases progress through the courts, antitrust issues are no longer mere background noise but demand serious attention from investors.