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Apple Stock Falls 3% After Forecast for Weak Holiday Quarter

Apple building

Apple shares reportedly experienced a decline after the company issued a warning Thursday (Nov. 2) about a lackluster holiday quarter.

The stock initially fell more than 3% before trading opened, but later pared losses to 1.5% after a U.S. jobs report suggested a potential pause in interest rate hikes by the Federal Reserve, Reuters reported Friday (Nov. 3).

Apple’s forecast for sales during the holiday quarter, which is typically its strongest period, fell below Wall Street estimates, according to the report. The company attributed this to weak demand for iPads and wearables. This projection has raised concerns about overall holiday demand, with experts predicting the slowest rise in sales during the crucial shopping period in years due to inflation.

Bernstein, a brokerage firm, noted that Apple’s revenue growth has stagnated over the past few quarters and is likely to continue to do so in the coming year, the report said. The holiday quarter typically sets the tone for Apple’s fiscal year, which runs until September.

Despite the concerns, Apple received some support when data revealed that nonfarm payrolls rose less than expected in October, per the report. This led to a boost in shares across the board, as investors speculated that the Federal Reserve may end its rate-tightening cycle.

Following Apple’s warning, at least 14 analysts lowered their price targets for the company, resulting in a decrease in the median price target to $195, according to the report. Apple currently trades at nearly 26 times its 12-month forward earnings estimates, which is comparatively low among the so-called “Magnificent Seven” stocks.

Analyst Tom Forte from D.A. Davidson told Reuters that Apple’s flat sales guidance indicates that the company can no longer rely solely on iPhone sales to drive its stock higher, as it has done in the past.

The iPhone, which is the company’s primary revenue generator, saw an increase in sales during the September quarter and is expected to continue this trend in the last three months of 2023, the report said.

Apple CEO Tim Cook also sought to allay concerns about the company losing market share in China to competitors like Huawei, per the report. He stated that the iPhone 15 models set a quarterly record for sales in mainland China during the September quarter.

Apple’s forecast came on the same day that the National Retail Federation (NRF) said it expects holiday spending to return to a pre-pandemic growth rate of between 3% and 4% this year. That growth rate is slower than that of the previous three years, but comparable to the average annual increase of 3.6% seen in the 10 years before the pandemic, the retail industry advocate said Thursday.