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Apple Inc.’s stock is having its fifth down day in a row, and it’s off almost 12% to start 2024 during a period when the broader market continues to roar higher.
In other words, the shares are “at a crossroads,” according to Rosenblatt Securities analyst Barton Crockett. Apple
AAPL,
is dealing with all sorts of challenges, including regulatory pressures, anemic revenue trends and a dearth of mainstream new products.
See also: EU’s record Apple antitrust fine is just the start of a Big Tech regulatory crackdown this year
Mizuho desk-based analyst Jordan Klein, meanwhile, suggested that things could get worse if Wall Street were to find out that Warren Buffett’s Berkshire Hathaway was “selling down his massive stake.” He trimmed his position by about 1% in the most recent quarter, but Klein wonders if more selling could be on the way — or even in the works currently.
Buffett is one of the largest Apple shareholders and “up a ton on his stake,” according to Klein. Given the size of the position, at about 905 million shares, and the drumbeat of negative commentary that’s been weighing on the stock lately, Klein said he “would not be surprised if [Buffett] is selling right now.”
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“He knows when that 13-F comes out showing he started to sell, that [Apple] shares will get killed as retail investors rush for the exit,” wrote Klein, who’s associated with Mizuho’s trading desk and not its research unit.
Berkshire didn’t immediately respond to a MarketWatch request for comment.
Klein has recommended that Apple investors start selling some of their shares and instead start looking at other hardware plays, such as shares of Dell Technologies Inc.
DELL,
Western Digital Corp.
WDC,
and Silicon Motion Technology Corp.
SIMO,
He expects that Apple’s stock could lag until the company previews its plans for generative AI, likely at the annual June WWDC developer event.
Rosenblatt’s Crockett is also looking ahead to that event. “If Apple can launch inspiring new AI capabilities, that could go some way to easing the current funk,” he said in a note to clients.
Chief Executive Tim Cook has teased a coming announcement on generative artificial intelligence, and many think that will come at WWDC. But it’s not immediately clear what Apple plans to do with AI.
For one, the company “is not prominently visible in development of [large language models] or generative applications, and it spends less [than peers],” Crockett noted.
He pointed out that Facebook-parent Meta Platforms Inc.
META,
spent $38 billion last year on research and development and forecasts $30 billion to $37 billion in capital expenditures this year, while Google-parent Alphabet Inc.
GOOGL,
GOOG,
shelled out $45 billion for R&D in 2023 and is expecting to spend a “notably larger” amount on this year’s capex than last year’s $32 billion sum.
Apple, by contrast, spent $30 billion on R&D last fiscal year and outlaid $11 billion for capex.
“The portion of R&D and capex spend on AI is also probably much larger at Alphabet and Meta than Apple,” Crockett said.
Given the relative scope of spending, he’s doubtful Apple will be able to compete against companies like Alphabet and Microsoft Corp.
MSFT,
when it comes to generative AI subscription sales.
“We suspect Apple will have more success touting its AI processing power for apps from Microsoft and others, making AI’s value to Apple mainly in boosting iPhone and Mac sales,” he wrote. Case in point: Apple on Monday touted its new MacBook Air lineup as “the world’s best consumer laptop for AI.”
Crockett has a neutral rating and $189 price target on Apple’s stock.
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