Apple shares weaken after warning of sluggish holiday quarter

Apple shares pared losses on Friday after a US jobs report boosted expectations the Federal Reserve would hold off on raising interest rates, driven by forecasts for a shorter holiday quarter.

The stock was down 1.5 percent in early trading, having fallen more than 3 percent before the bell. If the losses were sustained, the world’s most valuable company was set to lose $40 billion (about Rs 3,32,630 crore) in market value.

The iPhone maker on Thursday forecast sales for the holiday quarter were bigger than Wall Street typically estimates, blaming weak demand for iPads and wearables.

The estimate has fueled fears about widespread holiday demand, including estimates from the US National Retail Federation and Deloitte that predict the slowest sales growth in the key shopping period in years due to sticky inflation.

“Apple’s revenue growth has stalled over the past few quarters — and is likely to remain flat next year,” brokerage Bernstein said, adding that the holiday quarter typically sets the tone for Apple’s fiscal year that runs through September.

However, stocks got some support when data showed nonfarm payrolls rose less than expected in October, lifting stocks across the board on hopes that the Fed could end its rate-tightening cycle.

At least 14 analysts cut their price targets on Apple, dropping the average price target to $195, according to LSEG data. Apple is currently trading at about 26 times its 12-month forward earnings estimates, the lowest among the so-called “Magnificent Seven” stocks.

“We view management’s flat sales guidance as evidence that the company can’t rely on iPhone sales to prop up shares, as it has in the past,” said DA Davidson analyst Tom Forte.

Sales of iPhone, Apple’s main revenue generator, rose in the September quarter and are projected to register growth in the last three months of 2023 as well.

CEO Tim Cook also stressed that iPhone 15 models are performing well in China, as he tried to allay Wall Street’s fears that Apple is losing market share to a resurgent Huawei and other local smartphone vendors. Is. “In mainland China, we set a quarterly record for the September quarter for iPhone,” Cook told Reuters.

Many analysts appreciated the comment. “The Street will breathe a sigh of relief on this front,” said Wedbush Securities analyst Dan Ives.

© Thomson Reuters 2023

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