Apple shares fall 3% on first trading day of year after rare downgrade

Shares in Apple soared 50% last year.

Shares in Apple fell 3% at one stage on the first trading day of the new year, after Barclays downgraded the world's most valuable firm on concerns that demand for its devices from the iPhone to Mac will remain weak in 2024.

Barclays is the second brokerage to have the equivalent of a "sell" rating on the stock, which now has its most number of bearish recommendations in at least two years. 

Apple has been grappling with a demand slowdown since early last year and has forecast key Christmas-quarter sales below Wall Street estimates. Its performance in China has also been a worry after the revival of local rival Huawei.

"The iPhone 15 has been lacklustre and we believe iPhone 16 should be the same," Barclays said in a client note, pointing to the China weakness as well as subdued demand in developed markets.

The brokerage also warned risks were mounting for Apple's services business, which has come under the scanner in countries, including the US, over app store practices. The business has often outpaced growth in Apple's hardware segment in recent years and now accounts for nearly a quarter of the company's total revenue.

The share drop on Tuesday was set to wipe off about $90bn (€82bn) from Apple's market capitalisation. The shares soared nearly 50% in 2023 and hit a record high in mid-December amid a wider rally in Big Tech stocks, which pushed Apple's stock market valuation to above $3 trillion.

Barclays downgraded the stock to "underweight" from "neutral" and trimmed its 12-month price target by $1 to $160. Before Tuesday, BBA's "sell" recommendation was the only bearish rating on Apple since July 2022.

Analysts, on average, rate the shares in the iPhone maker as a "buy", with a median price target of $200. The company trades at about 28.7 times its 12-month forward earnings estimates, much higher than the benchmark S&P 500's 19.8.

Barclays analyst Tim Long is rated two out of five stars for his estimates accuracy on Apple, according to LSEG data. 

Reuters