People in China consume a lot of apples on Christmas Eve, known in the country as “Peaceful Night,” because the Mandarin word for “apple” sounds so close to ”peace.”
But Apple (AAPL) wasn’t as lucky in the Chinese market during the recent holiday season.
In the December quarter, iPhone sales in China, Apple’s second-largest market, dropped 18.2%. This caused global iPhone sales to decline 5% during this key shopping period, according to research cited by Bloomberg.
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The iPhone is Apple’s biggest revenue contributor, accounting for nearly half the sales in the most recent reported quarter.
Apple’s new artificial intelligence feature, Apple Intelligence, is still unavailable in China, which reduces its selling points.
But the soft sales in China aren’t just about lacking AI.
Apple stock is down roughly 11% year-to-date.
Justin Sullivan/Getty Images
Why is Apple struggling in China?
Competition for smartphone sales in China is getting sharper. Data last week indicated that local brands Huawei and Vivo secured first and second place in overall handset-market share in the world’s second-largest economy last year.
And price cuts aren’t enough to fix Apple’s troubles in China.
“Apple’s iPhone strategy is fundamentally the same everywhere — set prices above all rivals on the premise that customers are so locked in to their iPhones that they can’t afford to switch to lower-priced rivals,” Peter Cohan, who runs a management consulting and venture capital firm, told Forbes.
“In countries like China, that strategy only appeals to a small percentage of the market. The majority of its smartphone buyers there are happy to buy from a local manufacturer that offers a much lower-priced product with features tailored to local needs,” he said.
Apple shares have dropped 13.6% since their Boxing Day peak, wiping out more than $600 billion in market value. The Cupertino, Calif., tech group lost its place as the world’s most valuable company to Nvidia (NVDA) .
What to expect from Apple? Awaiting the Q1 report
Apple is set to post its fiscal 2025 first-quarter results after the market closes on Jan. 30.
The company expects “low-to-mid-single digit” percent sales growth for the quarter, according to its latest earnings call.
For the most recent quarter ended Sept. 28 Apple reported adjusted fiscal Q4 earnings of $1.64 a share, up 12.3% year-over-year and beating Wall Street’s $1.60 consensus estimate. Revenue rose 6% to $94.93 billion, surpassing the $94.58 billion consensus.
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IPhone sales reached $46.22 billion in the September quarter, a 6% increase from the year-earlier period and ahead of analysts’ projection. The report also ended a streak of two consecutive quarters of year-over-year sales declines for the product.
Mac, iPad and other product sales fell short of Wall Street expectations.
Apple’s stock price dropped 1.3% in the trading session following the release of its September quarter results.
Analysts cut Apple stock price targets, ratings
Apple stock gained 30% in 2024, but a number of analysts have lowered their price targets for Apple before the next earnings report, citing weak sales and outlook.
Jefferies downgraded Apple to underperform from hold and lowered its price target to $200.75 from $211.84, citing “weak” iPhone sales, thefly.com reported on Jan. 20.
“We lower forecasts driven by weak iPhone sales and the general [consumer electronics] market and our reduced outlook for iPhone 17/18 due to slower AI uptake and commercialization,” Jefferies analysts said.
The firm added that Apple could miss its fiscal-first-quarter revenue guidance, and its guidance for the March quarter “could also disappoint.”
Related: Goldman Sachs analyst tweaks Apple stock price target ahead of Q1 earnings
JP Morgan cut its Apple price target to $260 from $265 while affirming an overweight rating, according to thefly.com.
The investment bank’s analyst said that concerns ahead of the earnings report center more on Apple’s outlook than on the quarter’s results.
JP Morgan predicted Apple could continue losing market share in China, as the company has passed its product cycle peak and local subsidies are focused on low- to mid-tier smartphones, excluding high-end devices.
The firm also said Apple’s AI features are gaining little traction, which could result in flat unit sales in coming quarters. But further declines in unit sales are unlikely “given trough replacement rates already.”
Loop Capital also downgraded Apple, to hold from buy, with a $230 price target, citing a “material” iPhone demand reduction.
“We’re downgrading to hold on the heels of work from Loop Capital Supply Chain Analyst John Donovan that suggest a material iPhone demand reduction beginning in the March quarter but materially amplifying in the June and September” periods, Loop’s analyst said.
Loop’s previous “structural buy call could still materialize,” but it “certainly won’t be for the next nine months,” the analyst said.
The Wall Street veteran trader Stephen “Sarge” Guilfoyle said in a post on TheStreet Pro that he was selling his long position in Apple stock.
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“Apple is a cash flow stock now, not a growth stock, and their technology is not at the forefront of anything. What they have is a semi-captive user base,” Guilfoyle, whose career stretches to the New York Stock Exchange floor in the 1980s, said.
Apple closed at $223.66 on Jan. 23. The stock is down roughly 11% year-to-date.
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