Updated at 9:31 AM EDT
Apple (AAPL) shares moved firmly higher in early Monday trading after a key Wall Street analyst lifted his price target on the stock ahead of its highly anticipated March quarter earnings later in the week.
Apple, which this year has shed around $400 billion in market value as well as its spot as the world’s most-valuable company to tech rival Microsoft (MSFT) , has been pinched by a slump in demand for its new iPhones as well as its seemingly slow-footed paced on AI innovations.
Data from Counterpoint Research earlier this month suggested that Apple has also lost its place as the top smartphone seller in China, with first-quarter sales in the world’s biggest market falling nearly 20% from a year earlier.
Tim Cook, Apple’s highly-respected CEO, looked to address that slide with a five-day visit last month, during which he opened the company’s newest flagship Apple Store in Shanghai and met with key suppliers and government officials including Commerce Minister Wang Wentao.
Apple CEO Tim Cook will be under some pressure to address both the group’s sliding China sales as well as its AI investment plans when it publishes March-quarter earnings later this week.
Justin Sullivan/Getty Images
China remains one of the most important markets for Apple, accounting for around 20% of its global sales, pegged last year at around $386 billion. But that share has fallen steadily since 2015 and has largely plateaued since the covid pandemic of 2020.
Apple China issues ‘more cyclical than structural’
Alliance Bernstein analyst Tony Sacconaghi, however, sees Apple’s China issues as “more cyclical than structural.” He argues in a note published on April 29 that the stock has “derated significantly amid a weak iPhone 15 cycle and fears that Apple’s China business is structurally impaired.
“Historically Apple’s China business has exhibited much higher volatility than Apple overall, given its very feature-sensitive installed base,” Sacconaghi wrote, as he lifted his rating on the group to outperform from market perform — effectively to buy from neutral — while keeping his $195 price target in place.
“We further believe that replacement-cycle tailwinds and incremental generative-AI features set up Apple well for a strong iPhone 16 cycle,” he added.
Related: Apple stock slips after CEO Tim Cook pitches China
Cook is also under some pressure to deliver eye-catching headlines from the group’s World Wide Developers’ Conference later this summer, when the company typically introduces its tech-focused ambitions, separate from its traditional autumn product launches.
Cook has said that generative-AI technologies remain a “huge opportunity” for Apple, and in the earnings conference call he talked about “a lot of work going on internally.”
Apple’s March-quarter earnings in focus
“Our ‘MO’, if you will, has always been to do work and then talk about work and not to get out in front of ourselves. And so, we’re going to hold that to this as well,” Cook told investors earlier this year. “But we’ve got some things that we are incredibly excited about that we’ll be talking about later this year.”
Ahead of that, however, is the group’s fiscal-third-quarter report, slated for after the close of trading on May 2. Analysts are looking for a bottom line of $1.50 a share, down from $1.52 over the year-earlier period, with revenue falling 5.1% to $90.04 billion.
Related: Goldman Sachs analysts unveil a big change to Apple’s outlook
Earlier this year Apple itself forecast iPhone sales of around $50 billion for the quarter, a tally that would mark the worst quarter since the covid pandemic trough of 2020.
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Bernstein’s Sacconaghi, however, sees both the March-quarter earnings report and Apple’s near-term profit guidance as “a clearing event for the stock, similar to 2023 and 2019.”
“Moreover, Apple is entering its seasonally strong trading period — the stock has outperformed in the three months leading into the iPhone launch in 15 of the last 17 years,” Sacconaghi noted.
Apple shares were marked 2.4% higher in early Monday trading to change hands at $173.36, a move that would trim the stock’s year-to-date decline to around 6.6%.
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