Apple Resurgent Despite Revenue Decline & AI Threat

  • AAPL.us
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Apple Analysis

The tech sector had a bad third quarter, but Apple's stock fared much worse than the NAS100 and the rest of Magnificent Seven. It shed more than 10% in a notable correction from July's record peak. Declining sales against an overall tough smartphone market, unimpressive new iPhones and dependence on China amidst fraught Sino-US relations were some of the factors contributing to the stock's slide, along with generally weary investors around lofty valuations.

Its latest earnings report underscored these challenges, with revenues falling for fourth straight quarter, marking the worst slump in twenty-two years. Forward guidance was not encouraging either, since sales of the current October-December period are expected to be similar to a year ago, according to CFO Luca Maestri. Concerns around China persisted, as sales there fell 2.5% y/y.

At the same time, the company is cagey around its generative artificial intelligence (AI) strategy, with CEO Tim Cook merely saying that "we have work going on", during the recent earnings call. This stance is not atypical for Apple, but creates concerns that it may fall behind on the most important technology in decades. Rival smartphone-maker Samsung turned heads last week, announcing its own AI model and plans to start integrating the technology to its handhelds early next year.

On the other hand, Apple's quarterly results showed resilience in iPhone sales, which expanded nearly 3% y/y despite global headwinds, while the increasingly important Services segment reached record revenues. Furthermore, Apple is one of the most valuable companies in the world, sitting in a pile of $162 billion in cash.

AAPL.us overlooked the mostly poor quarterly results and Samsung's entry into generative AI, continuing its recent recovery and helped by the broader relief-rally in Wall Street. It closed last week well above the daily Ichimoku Cloud, bringing the all-time highs in its crosshairs (198.35). On the other hand, the RSI moves to overbought territory and this can contain the advance. Moreover, the higher price may reignite concerns around its valuation, given the lack of growth. As such, there is risk for a return below the EMA200 (172.5), but strong catalyst would be required for weakness towards and beyond 161.22.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

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