Apple’s decision to cut more than 600 employees in California speaks to the challenges the tech titan faces that are affecting its stock price — and why analysts are divided on its prospects.
The iPhone maker is laying off or reassigning employees as it reportedly pulls back from plans for electric vehicles and next-generation Apple Watch displays.
At the same time, reports suggest that Apple is considering building robots that help people with household chores. But some analysts warn the move could be a costly distraction and may not bear fruit this decade.
“I consider the likelihood that we will see a product in the next 5 years to be slim to none,” said Gene Munster, managing partner of Deepwater Asset Management. job on X. “As a reminder, Apple works on a lot of things that never see the light of day.”
Wedbush technology analyst Dan Ives took a harsher tone in a CNBC interview this week.
“It would be a horror show if they actually spent money on robots,” he said. “They need to focus on AI. For Cook, his legacy will be AI. If they went after robots, it would be a black moment for Apple.”
Sour on stock
Apple’s announced dismantling of two projects and teams, and its shift toward personal robotic assistants, will only fuel fears that the company has lost focus and fallen behind its big tech peers in critical areas like AI.
Fears that Apple had lost its way weighed on its stock price. Shares fell 12% from their closing price at the end of 2023, reducing the company’s value by more than $300 billion.
By contrast, the S&P 500 is up nearly 8% this year, and its main rival and OpenAI investor, Microsoft, is up about 11%.
Microsoft is now worth about half a trillion dollars more than Apple, at $3.1 trillion.
Other pressures on the stock include concerns about overvaluation, slowing growth, growing tensions and slowing sales in China, high-profile clashes with regulators in the United States and Europe and loss of cachet defensiveness of investors as recession fears fade.
Even so, Apple remains a mainstay of many stock portfolios and is unlikely to fall further, Craig Johnson, chief market technician at Piper Sandler, told Bloomberg.
“Nobody wants to sell more of their positions in Apple because there’s a dividend, big stock buybacks, and nobody wants to pay capital gains taxes,” he said.
Warren Buffett, whose Berkshire Hathaway conglomerate owns nearly 6% of Apple, has hailed it as a “family jewel” and “probably the best company” he knows. The legendary investor also praised the company’s buybacks because they gradually increased Berkshire’s stake without it spending a dime.
“Attractive location”
Johnson echoed Buffett’s views in an interview with Yahoo Finance. He praised Apple’s financial strength, strong profit margins, buybacks and business model that promotes repeat purchases. He also touted it as a safe haven if stocks fell.
“With the market looking like it’s gearing up for a good 5-10% correction, Apple seems like a pretty attractive place for people to park their money,” he said.
Apple’s stock may be under pressure and the company may be a bit lost, but analysts continue to see a world-class company going through tough times instead of a lost cause.
businessinsider
