Apple Inc.
What Happened: An analyst at Loop Capital, Ananda Baruah, has revised his estimates for Apple's earnings, foreseeing a potential drop in the company's overall revenue and EPS for the first time since 2016, reported Barron's.
Baruah's projections for the March and June quarters suggest that Apple's earnings might not meet Wall Street's expectations. He reduced his target price for the Apple stock to $170 from $180, with a "Hold" rating.
Baruah attributes the potential decline in earnings to sluggish iPhone sales, particularly in China, where sales have plummeted by 30% year-over-year. This is despite a 7% overall decrease in smartphone sales in China during the same period.
"iPhone unit shipments are simply too soft" due to growing competition in China, Baruah said in his note. He also noted that Apple is experiencing a flattening average selling price for iPhones, partly due to a decrease in product offerings.
Baruah notes that while the March quarter results are "at some risk" of failing to meet Street expectations, Apple faces a "material risk" in the June quarter, suggesting that it could get worse for Cupertino as far as iPhone sales are concerned.
Despite the concerning figures, Baruah suggests that Apple's stock could receive a boost from the announcement of AI developments at its June developers' conference and the sales of its Vision Pro headset.
Why It Matters: Apple's recent struggles in the Chinese market have been a topic of concern. The company's iPhone sales in China faced a sharp decline amid rising competition.
This was followed by CEO Tim Cook's visit to China which was seen as a message to the Xi Jinping administration that Apple is committed to the Chinese market.
Analysts have also pointed out that Apple's struggles in China are less about Apple and more about a much bigger geopolitical kerfuffle. This was echoed by "Mad Money" host Jim Cramer who said that nothing good is going to come of China for Cupertino after iPhone's recent plunge.
Price Action: Apple's stock closed 0.45% lower on Monday at $170.03, according to Benzinga Pro.
