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In every quarter of the past fiscal year, Apple has reported a decline in sales. It is the company’s longest losing streak in decades. Add to that a dawdling approach to generative artificial intelligence and it makes sense that Apple’s share price growth should lag behind peers and draw downbeat analysis.
Such jitters meant that shares in the company on Tuesday fell nearly 4 per cent — a drop equal to more than $100bn in market value — following a downgrade from Barclays. Analysts pointed to weakness in iPhone 15 demand. Apple also faces an uncomfortable year of regulatory scrutiny that could threaten a lucrative search deal with Google worth more than $20bn per year.
Both worries should be tempered. Regulatory decisions are not imminent and there is a good chance growth will return in 2024. Overall smartphone sales fell last year but the premium market grew 6 per cent, according to data from Counterpoint research. This is a market in which Apple dominates, with 71 per cent of the global total. Last year, it opted not to raise prices for its new model. This year it should give status-seeking buyers the chance to stretch their credit cards. The average iPhone selling price will rise. Raising this will bump revenues up even if sales volume declines.
Other new products expected this year include the Vision Pro virtual reality headset, a new iPad and the possible introduction of generative AI software integrated into Apple devices. The company may have missed out on the early flush of AI hype but it has also avoided rushing out a sub-par product that might harm its reputation.
But the real reason to think the stock can continue to trade at a forecast earnings multiple twice as high as the 10-year average is the balance sheet. At the last count Apple had $162bn in cash and marketable securities. If it spends the same proportion of this on dividends and buybacks as it did last year then investors can expect to receive a hefty $89bn in 2024.
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