Apple Loses $100 Billion in Market Cap After Barclays Downgrade

A women uses an iPhone mobile device as she passes a lighted Apple logo at the Apple store at Grand Central Terminal in New York on April 14, 2023. Mike Segar/Reuters

Apple’s market cap declined by over $100 billion on Tuesday after Barclays downgraded the company’s stock amid concerns over “weakness” in iPhone sales volumes.

Barclays downgraded Apple from an “equal weight” to an “underweight” rating, pointing to lackluster iPhone 15 sales, specifically in China.

The brokerage pushed down the stock’s price target to $160 from $161.

“We are still picking up weakness on iPhone volumes and mix, as well as a lack of bounce-back in Macs, iPads, and wearables,” analysts led by Tim Long said in a note on Tuesday, according to CNN. “The continued period of weak results coupled with multiple expansion is not sustainable.”

The downgrade had a significant impact on Apple stock, with shares falling by almost 3.6 percent on Tuesday.

The decline wiped off over $100 billion in Apple’s market capitalization.

Apple posted lower net sales for all devices in the 2023 fiscal year that ended in September.

iPhone net sales dipped to $200.58 billion for the 2023 fiscal year, down from $205.48 billion in the previous year.

Mac revenues dropped to $29.35 billion from $40.17 billion; iPad sales to $28.3 from $29.29 billion; and wearables, home, and accessories to $39.84 from $41.24 billion.

Barclays’s downgrade is based on the softening demand for the latest iPhone. Since the device has few new features, there is less incentive for people to buy it.

The latest version of the device, iPhone 16, is expected to launch later this year and will have some new features. However, Barclays does not think this will have any significant positive impact on the company’s revenues.

“We expect reversion after a year when most quarters were missed and the stock outperformed,” the note said, according to Bloomberg. “Our checks remain negative on volumes and mix for iPhone 15, and we see no features or upgrades that are likely to make the iPhone 16 more compelling.”

According to Reuters, analysts have given Apple a “buy” rating on average, with a median price target of $200. The company’s stock was trading at around $185 as of 3:50 a.m. ET.

Last year, Apple’s share price grew by close to 50 percent, with the company’s market valuation hitting $4 trillion. With Barclays’s “underweight” classification, Apple has five “sell” or equivalent ratings compared to 34 “buy” and 14 “hold” ratings, according to data compiled by Bloomberg.

The Apple share downgrade also impacted Asian suppliers of the company. Shares of major Apple suppliers like Taiwan Semiconductor Manufacturing Company and Foxconn dropped in Wednesday morning trade.

Apple’s Challenges in 2024

While Apple’s net sales on devices dropped in fiscal year 2023, its services segment registered growth, rising from $78.12 billion in 2022 to $85.2 billion. The Barclays note warned that the company’s services business could be at risk following legal scrutiny over Apple’s app store practices.

An ongoing antitrust trial in the United States is examining Google’s more than $26 billion payment to Apple in 2021 to keep its search engine the default across its devices. If Google loses the case, it could be forced to end this arrangement, taking out a key source of revenue for Apple.

Eric Seufert, an independent analyst, estimates that this revenue makes up about a quarter of Apple’s annual revenue from the services segment, according to the Financial Times.

Apple watches are seen on display at the Apple Store in Grand Central Station in New York City on Dec. 18, 2023. Michael M. Santiago/Getty Images

A key factor this year regarding Apple’s future is China, which accounts for roughly 20 percent of the company’s global sales.

Major media outlets have reported that the Chinese regime has banned government employees from using foreign phones. Beijing has officially denied these reports. Instead, a foreign affairs spokesperson cited “security incidents related to Apple mobile phones” as a major concern for the regime.

If an unofficial prohibition of foreign phones like the iPhone in the government sector exists and expands, it could mean bad news for Apple. Such bans will fall in line with Beijing’s efforts to remove its dependency on American technology.

While Apple’s nearly 50 percent share price growth in 2023 is impressive, it pales in comparison to some of its tech peers. For instance, shares of Meta rose by close to 200 percent while Nvidia more than tripled last year.

Apple is looking forward to launching its Vision Pro mixed-reality headset this year. If the product turns out to be a hit, it could boost the company’s valuation. However, if it fails, Apple’s $3 trillion market capitalization could be questioned.

The company is also facing challenges with its Apple Watch product. In October, the U.S. International Trade Commission (ITC) ordered Apple to stop importing or selling certain watches with the pulse oximetry feature.

The decision came as part of a complaint filed by Masimo, a California-based developer of smart wearables, which accused Apple of using its patented technology. The pulse oximetry feature measures the blood oxygen levels of a user.

“This important determination is a strong validation of our efforts to hold Apple accountable for unlawfully misappropriating our patented technology,” said Masimo founder Joe Kiani. Apple has denied the patent infringement claims.

Last week, the ITC ban went into effect, which blocked Apple Watches. However, Apple successfully got a federal appeals court to place the ban on temporary hold.