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Apple stock (NYSE: AAPL) rose to a record high yesterday despite concerns over higher tariffs on Chinese imports under Donald Trump. A section of the market has also been apprehensive about iPhone 16 sales outlook but the stock has defied skepticism to hit record highs.
Notably, Trump has vowed to increase tariffs on imports from China – a country that still produces the bulk of iPhones for Apple despite the company diversifying its supply chain to other Asian countries.
While there are genuine concerns over Trump’s tariffs as well as the relatively modest reception to Apple’s AI-powered iPhone 16, some analysts are not too perturbed.
Wedbush Believes Scepticism Over Apple Was Overblown
Wedbust senior analyst Dan Ives that skepticism over Apple was blown out of proportion. Ives, who has an “overweight” rating and $300 target price on AAPL said, “The Street is starting to realize the iPhone 16 is the start to a super cycle and China sales look robust, sending the bears into hibernation mode.”
Morgan Stanley also reiterated similar views and, in its note, last week the brokerage said that its channel checks “reinforce [the] multi-year iPhone upgrade thesis.”
“Our 2024 AlphaWise Global Smartphone Survey confirms that iPhone upgrade rates are improving and Apple Intelligence is an emerging catalyst to iPhone upgrades, with broader availability key to unlocking pent-up demand globally,” added Morgan Stanley in its note.
Loop also reiterated AAPL stock as a buy and said, “Our thesis is that AAPL has an opportunity the next few years to solidify itself as consumer’s Gen AI ‘base camp’ of choice, just as it did for social media 15 years ago (with iPhone) and digital content consumption 20 years ago (with iPod).”
Apple Stock Fell After Fiscal Q4 Earnings
Apple shares closed in the red after the company released its fiscal Q4 2024 earnings last month. The company reported revenues of $94.93 billion which were up 6% YoY and ahead of the $94.58 billion that analysts were expecting. The company’s EPS rose 12% YoY to $1.64 and the metric was ahead of the $1.60 that analysts were expecting.
Looking at the different products, iPhone sales rose 6% to $46.22 billion and came in ahead of the $45.47 billion that analysts were expecting. However, sales of iPad and Mac were a bit shy of estimates. The company’s Services revenues came in at 24.97 billion as compared to $25.28 billion that analysts were modeling.
Meanwhile, even as Apple’s overall sales grow at a healthy pace, its revenues in Greater China fell slightly to $15.03 billion in the September quarter. Apple has lost market share to domestic Chinese smartphone makers, especially Huawei.
The fact that Apple Intelligence features are currently not available in China is not helping matters.
The company generated operating cash flows of $27 billion in the quarter and returned $29 billion to shareholders in the quarter, predominantly in the form of buybacks.
In his prepared remarks, Apple’s CEO Luca Maestri said, “We are very pleased that our active installed base of devices reached a new all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and loyalty.”
AAPL’s Guidance Was a Bit Soft
While Apple’s fiscal Q4 earnings were better than expected, the company’s guidance failed to impress. Apple expects its revenues to rise by “low to mid-single digits” in the December quarter. The company expects services revenue to grow double digits in the current fiscal quarter, at a similar pace in the last fiscal year where the segment’s revenues rose 12.9%. It expects its gross margins to be between 46%-47% in the first quarter of its fiscal year 2025.
Warren Buffett Has Been Selling Apple Shares
While AAPL shares have risen to record highs, Berkshire Hathaway chair Warren Buffett continues to sell Apple shares. The conglomerate sold a quarter of its stake in Apple in Q3 which lifted its cash pile to a record high of $325 billion.
At Berkshire Hathaway’s annual meeting in May, Buffett said that he was selling Apple shares over tax considerations. “It doesn’t bother me in the least to write that check and I would really hope with all that America’s done for all of you, it shouldn’t bother you that we do it and if I’m doing it at 21% this year and we’re doing it a little higher percentage later on, I don’t think you’ll actually mind the fact that we sold a little Apple this year,” said Buffett at this year’s shareholder meeting.
That said, not everyone is convinced that Buffett is selling Apple shares merely for tax reasons – especially considering the aggressive pace at which the “Oracle of Omaha” has been offloading shares.
In the past, Buffett has regrated selling AAPL shares. With Apple stock rising to record highs could Buffett admit to yet another mistake in selling the shares? We’ll have to wait and see.
