iPhone maker Apple’s AAPL shares have been hovering around a record high lately. Recently, this “Magnificent 7” member has been in the news for hitting back-to-back highs, reflecting bullish price action. The stock is up 24% so far this year, way lower than one of the most talked-about Mag 7 members, NVIDIA Corp NVDA (up 191.5% year-to-date).
Apple shares have gained 13.7% past month (as of Oct. 24, 2024). We would like to note that this stock can maintain its winning price momentum before reporting earnings. The Apple stock is expected to report its quarterly results on Oct. 31 after the market’s close.
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Apple's iPhone Sales in China Falter
Apple's iPhone sales in China fell 0.3% while rival Huawei posted a 42% increase in the third quarter of 2024, as competition strengthens in the world's largest smartphone market, per a Reuters article.
Although Huawei claimed the third place in the market share chart with 15.3% focus, gaining 4.2 percentage points, Apple’s share was down 0.5 percentage points year on year. However, Apple has the second place with a 15.6% market share, per IDC, as quoted on Reuters.
Vivo, which primarily sells budget phones, holds the top position. Apple has met more challenges in China, including restrictions on iPhone use by some government agencies. Apple has since tried to overcome the threat with multiple discount campaigns to boost sales.
Any Hope Ahead?
Apple’s third-quarter performance was helped somewhat by the new iPhone 16, which went on sale on Sept. 20. The new iPhones got off to a strong start in China, with sales 20% higher in the first three weeks since launch compared with the 2023 models. But, on the same day in September, Huawei launched a competing product- a tri-foldable phone.
Industry experts believe that Apple can manage to perform well in China in the future with the help of the iPhone 16 series. The iPhone 16 lineup is Apple's take on artificial intelligence, namely Apple Intelligence. The iPhone 16 also has an AI application called Visual Intelligence (read: Bet on "Apple Intelligence" With These ETFs).
Morgan Stanley analyst Erik Woodring said iPhone lead times, a proxy for smartphone demand, is “encouraging” and the 56 million iPhones shipped last month was about 10% higher than expected. This would result in about $2.5 billion in marginal quarterly revenue upside, as quoted on Forbes. Apple also recently announced its first new iPad Mini tablet since 2021, a model emphasizing AI applications.
Should You Buy Apple Shares?
Apple has been a laggard among the “Mag 7” group so far in innovating, deploying and promoting AI. Investors should note that the rollout of Apple Intelligence is slow. Apple's iPhone 16 smartphones officially went on sale on Sept. 20 but Apple Intelligence won't be available until sometime in late October, as quoted on investors.com.
And even then, the AI features will be limited and in "beta" or test mode. Wall Street analysts described Apple Intelligence as "not quite ready for prime time" and "not a fully baked offering," per investors.com.
In a nutshell, it all depends on AI. The more Apple will integrate AI initiatives in its products and services, the more demand the iPhone maker is likely to see. Without the widespread adoption of AI, it is tough to stay in the competition.
On the downside, on Aug. 3, Warren Buffett's Berkshire Hathaway (BRK.B) disclosed a massive sale of its Apple stake. Berkshire Hathaway cut its stake in Apple by 49% in the second quarter (read: ETFs in Focus as Buffett Cuts Apple Stake by Nearly 50%).
Magnitude - Consensus Estimate Trend
Apple’s earnings estimate for the upcoming quarter fell to $1.54 per share from $1.60 per share in the last 30 days. For the full fiscal year, the earnings estimate fell to $6.65 from $6.70 per share. The earnings estimate for the next year has been cut by a cent to $7.53 per share over the past week.
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Should You Play Apple With ETFs?
Since there are still uncertainties related to the success of Apple’s AI rollout, it is better to track the company using the ETF approach. The basket approach minimizes the company-specific concentration risks. Apple-heavy ETFs include the likes of Technology Select Sector SPDR Fund XLK, iShares Global Tech ETF IXN and iShares U.S. Technology ETF IYW.
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