Apple’s 2024 is off to a rocky start
We’re less than a month into the new year, but it feels like it’s been a lot longer for Apple (Camel) observers. The tech giant is making headlines left and right as it makes some cuts to its stock price, faces major changes needed to its App Store policies, and prepares for a potential antitrust lawsuit that could target large swaths of its business.
All this comes at a time when Apple is preparing to launch its new phone The Vision Pro headset is priced at $3,499. Apple’s most ambitious product in years, the Vision Pro pushes the company into a product category that even established players like Meta (dead) struggled to become a hit.
It’s a lot to say the least.
But it’s not all doom and gloom for Apple. AI-equipped iPhones and a reacceleration of the company’s services business should help fuel growth in the coming years. If Vision Pro takes off, it will create an entirely new revenue stream across Apple’s hardware and services segments.
“I don’t think Apple is in any way exposed to any existential threat right now that wasn’t there before,” Gene Munster, managing partner of Deepwater Asset Management, told Yahoo Finance. “It’s just that they participate in the markets [have] Slower growth and they are looking for ways to try to stimulate that growth.
Apple slows down in China
China is Apple’s third-largest market, generating $72.6 billion of the company’s total revenue of $383.3 billion in 2023. North America, Apple’s largest market, generated $162.6 billion, while Europe generated $94.3 billion.
All of this makes reports of slowing iPhone sales in China the biggest and most pressing story for Apple. The slow economic recovery coupled with the resurgence of Huawei, which despite US sanctions has managed to produce smartphones with modern processors and features, is expected to hurt Apple’s market share in the country.
According to Counterpoint researchthe iPhone maker controlled 15% of the Chinese market in the third quarter of 2023. That was slightly better than Huawei’s 14% share, but behind Vivo’s 16% and Oppo’s 19%.
Analysts at Barclays, Pepper Sandler and Redburn Atlantic all pointed to the region as a potential problem for Apple, with Barclays’ Tim Long saying the company saw iPhone 15 data “progressively worse” from China. He also added that he doesn’t expect any “features or upgrades that could potentially make the iPhone 16 more attractive.”
Redburn Atlantic’s James Cordwell also criticized China in a January 10 note, saying he remains concerned about Apple’s competitive position in the country.
Harsh Kumar and Robert Aguano of Piper Sandler said a deteriorating macro environment in China could impact Apple’s mobile phone business.
“We are highlighting in our forecasts that China is a major factor in the sales swing next year,” Aguano told Yahoo Finance. “Any rebound in iPhone growth expectations will be fueled by either the resurgence of the Chinese consumer coupled with huge growth in other emerging markets like India.”
Antitrust Concerns and App Store Changes
Apple is also facing reports that the Department of Justice is preparing to file an antitrust lawsuit against the company. According to the New York TimesManagement could file the lawsuit, which will focus on Apple’s strategic hardware and software moats, as soon as March.
Critics have long called for antitrust enforcement to take action against Apple for creating policies that block users from accessing apps from third-party app stores or prevent device and app makers from using certain features in Apple’s iPhones, such as mobile payment technology.
The European Union is also trying to force Apple to ease restrictions on its App Store, including allowing third-party app stores on the iPhone. The company has also set up new US App Store rules that allow developers to advertise third-party links to make app purchases outside of the App Store. Apple will still charge a commission on those sales but will reduce the amount from 15% or 30% to 12% or 27%.
That has drawn a sharp rebuke from longtime rivals like Spotify who say Apple’s changes don’t go any further.
The Vision Pro is a risky bet
Apple’s new Vision Pro AR/VR headset is also a key part of the 2024 equation. The device, which is available for pre-order and goes on sale on February 2, is a big gamble for Apple, as it looks to enter an entirely new market.
With a starting price of $3,499, the Vision Pro won’t reach the sales volume of the iPhone. While initial reports indicate that pre-orders have sold out, there’s no guarantee that interest in the spatial computer will remain high.
“The initial sales data at launch are encouraging for us, but we remain cautious about the long-term prospects of the device,” Agano said. “It’s too early to say here.”
However, analysts said Apple’s long-term prospects remain strong. Wamsi Mohan, an analyst at Bank of America, told Yahoo Finance Live that he has a high degree of conviction that Apple will continue to rise in the coming years.
“It’s primarily about generative AI on iPhones,” he said. “We think this will be a major incentive.” Mohan also added that he believes Vision Pro will have long-term potential on the hardware and services fronts.
Aguanno offered a similar view on the company’s future outlook, saying Apple’s market position and product portfolio is strong.
We’ll get our first taste of Apple’s 2024 performance when it reports earnings on February 1.