Apple Stock Falls, But Keep Calm and HODL?

Share Price Performance:

• Apple( $Apple(AAPL)$ ), Amazon( $Amazon.com(AMZN)$ ), and Meta( $Meta Platforms, Inc.(META)$ ) all announced earnings after the market closed on Thursday.

• In summary, investors cheers on Meta’s best quarterly sales growth in more than two years, along with dividend announcements and share buybacks, while Amazon surprises investors on the upside with its advertising and AWS growth.

• In after-hours trading, Apple showed weaker performance compared to Meta and Amazon, experiencing a 2.9% decline, while Meta posted a 15.22% increase and Amazon posted a 7.1% uptick.

• Apple's investors are expressing concerns about the decline in sales in China, leading to a lower stock price.

• Apple is currently down by 5.6%. Historical data also indicates that most of Apple's corrections have occurred within the 20% range since 2018, except for 2018-2019 (-38%), 2020’s (-31% from February to March and -21% in September), and 2022 (-31%). Thus, we do not anticipate a drawdown of more than -20% unless major bad fundamental events occur.

Source: Tradingview, 2 Feb 2024

1Q 2024 Earnings Call:

• Apple's earnings for 1Q2024 generally exceeded street expectations.

• All attention was focused on China's iPhone sales before the earnings announcement. However, Apple demonstrated sales growth in all regions except for Greater China, which experienced a 12.9% year-over-year decline due to intensified local competition from Huawei. Tim Cook also mentioned that iPhone sales in mainland China were down by "mid-single digits" in the quarter.

Technical Analysis:

• We will reconsider our bullish outlook on Apple if the stock falls below the 1.414% Fibonacci Expansion Level at USD177.28.

• The 1.618% Fibonacci Expansion Level at USD197.94 does not appear to be an interim top, and I anticipate investors may chase the Apple rally driven by FOMO once the stock surpasses USD200.

• Therefore, accumulating Apple at lower prices, specifically at USD177.28 or USD162.90, is a preferred strategy over selling first and buying back later, despite the earnings weakness.

Source: Tradingview, 2 Feb 2024

Conclusion:

• Apple's 4Q2024 earnings results are generally positive. Investors should be pleased with the +6% year-over-year growth in iPhone revenue, surpassing analysts' estimates, and there's no need for excessive concern about China.

• China, contributing 17% to the total revenue, witnessed a 12.9% year-over-year decline in the latest quarter.

• Shifting focus from China's iPhone sales, my attention is more on India's sales due to its exciting middle-class growth. I perceive China's smartphone market as saturated relative to India, and I anticipate Apple investors will redirect their iPhone sales focus from China to India in the future.

• According to Counterpoint Research, Apple became the largest smartphone brand by revenue (not shipments) in India, with iPhone revenue share increasing from 17% in 2022 to 23% in 2023.

• India, not China, is expected to lead APAC growth in the next 3 years, according to S&P Global. We believe that Apple is one of the best US stocks listed on the US stock exchange to gain exposure to the exciting growth in India.

• Currently, based on Bloomberg consensus, analysts project a 12-month target price of USD199.84, representing an upside of 6.9% compared to yesterday’s closing price at USD186.86.

• Apple's stock has been downgraded by several analysts at the beginning of the year, and the weak China sales may have been mostly priced in. Thus, we maintain a long-term constructive outlook on Apple.