Apple’s Stock Facing Challenges as Warren Buffett’s Selling Stirs Concerns
Investor confidence wavers as regulatory pressures, lack of new products, and anemic revenue trends plague Apple
Date: [Insert Date]
Source: Bloomberg
Apple’s stock is currently experiencing a downward spiral, raising concerns that Warren Buffett’s Berkshire Hathaway might be offloading more of its shares. This trend has left the stock “at a crossroads,” as stated by Rosenblatt Securities analyst Barton Crockett. Apple is grappling with regulatory pressures, sluggish revenue growth, and a dearth of innovative products, making investors uneasy about the company’s future.
Buffett, a prominent Apple shareholder, has seen significant gains on his stake. However, Klein, an analyst at Mizuho, suggests that if Wall Street learns of Berkshire Hathaway’s possible selling spree, the situation could deteriorate further. Despite Buffett reducing his position by 1% in the previous quarter, Klein speculates that more selling may be imminent. Given the colossal size of Buffett’s stake, totaling about 905 million shares, and the negative sentiment surrounding Apple, Klein believes that Buffett might already be in the process of selling shares.
In light of these concerns, Klein advises Apple investors to consider selling some of their positions and explore other hardware investment opportunities. He anticipates that Apple’s stock price may continue to underperform until the company reveals its plans for generative Artificial Intelligence (AI), expected to be unveiled at the annual June WWDC developer event.
Rosenblatt’s Crockett shares Klein’s outlook and views the upcoming event as a significant catalyst. Apple’s CEO, Tim Cook, has hinted at an impending announcement regarding generative AI. However, Apple’s specific intentions concerning AI applications remain unclear. While the company is not actively engaged in the development of large language models or generative applications, it spends considerably less on research and development compared to industry peers.
Crockett highlights Meta Platforms Inc.’s $38 billion expenditure on research and development last year, along with expectations of $30-37 billion in capital expenditures this year. Similarly, Alphabet Inc. allocated $45 billion for research and development in 2023 and is expected to surpass last year’s $32 billion expenditure in this year’s capital expenses. In contrast, Apple spent only $30 billion on research and development during the previous fiscal year and dedicated $11 billion to capital expenditures.
According to Crockett, when considering the relative scale of spending, Apple may struggle to compete with industry giants like Alphabet and Microsoft Corp. in terms of generative AI subscription sales. Instead, he predicts that Apple will primarily focus on leveraging its AI processing power to enhance sales of iPhones and Macs through partnerships with companies like Microsoft. Crockett’s assessment of Apple’s stock remains neutral, with a price target of $189.
As Apple confronts its present challenges, the unveiling of its plans for generative AI at the June WWDC event becomes a critical inflection point. Offering innovative AI capabilities could potentially boost the company’s performance and alleviate the current slump. However, Apple will need to navigate regulatory hurdles, revitalize revenue trends, and introduce compelling new products to regain investor confidence and sustain long-term growth.
Analyst comment
Negative news: Apple’s stock is facing challenges due to regulatory pressures, slow revenue growth, and lack of innovative products. Warren Buffett’s Berkshire Hathaway may be offloading more shares, causing concern. Analysts suggest that if Wall Street learns of the selling spree, the situation could worsen. It is advised for Apple investors to sell some of their positions and explore other hardware investment opportunities. Apple’s stock price is expected to continue underperforming until the company reveals its plans for generative AI at the June WWDC event. Apple’s spending on research and development is relatively low compared to industry peers, which may affect its ability to compete in generative AI subscription sales. The unveiling of Apple’s AI plans is a critical inflection point that could potentially boost the company’s performance and regain investor confidence. Market outlook: Bearish, stock may continue to struggle in the short term.
