Key Takeaways
- Apple stock rose Monday following a note from Bernstein analysts, who upgraded the stock to outperform and maintained a price target of $195.
- Bernstein analysts said investors should “be like Buffett” and take advantage of this year’s downturn for the stock, which has come amid investor concerns about the iPhone maker’s revenue and China business.
- Separately, Apple’s iPad has also been classified as a “gatekeeper” under the European Union’s digital markets act designed to limit Big Tech’s power over the Internet.
Apple (AAPL) shares jumped Monday after an upgrade by Bernstein analysts, who said in a note that the company is an “essential consumer brand” whose shares have fallen too much on investor worries about weak revenue and China growth.
The analysts upgraded Apple, which reports quarterly earnings Thursday, to “Outperform” from “Market Perform.” They maintained their $195 price target on the iPhone maker. Apple shares were up 3.1% at $174.55 at around 1:00 p.m. ET, after rising as high as $176.03 early in the session.
Bernstein said investors should “buy the fear,” noting that the recent “pullback provides an attractive entry point.”
“Be like Buffett. Despite his reputation as a long term buy and hold investor, Warren Buffett has been remarkably disciplined at adding to his Apple position when it is relatively cheap and trimming when it is relatively expensive,” Bernstein analysts wrote.
Weak iPhone15 Cycle, China Concerns Weigh on Stock
Apple’s stock has underperformed this year mainly because of the weak iPhone 15 cycle, and concerns that the tech giant’s business in China is structurally flawed, the analysts wrote. Even with Monday’s gains, the stock is down about 8% since the start of the year.
However, Apple’s China struggles are “more cyclical than structural,” they said, with the company’s Chinese performance historically more volatile than elsewhere.
They noted that much of the ban on iPhones in China’s state firms has been in place for years and the “restrictions do not appear to be becoming incrementally more widespread.”
Bernstein analysts also said that the iPhone 16, when released, could trigger a new sales cycle due to the device’s artificial intelligence (AI) features, akin to gains when previous iPhone models were released with features like Siri and FaceTime.
The analysts also highlighted the fact that Apple’s stock could rise this summer as it has a “striking and persistent pattern” in the past 15 of the 17 years since the iPhone was first launched of outperforming the market ahead of iPhone launches.
Apple Faces Regulatory Onslaught, Now iPad in EU’s Sights
Apart from its struggles with losing ground in China, the company has also been battling regulatory challenges. The Department of Justice filed an antitrust suit against the company over an alleged smartphone market monopoly last month.
Apple also made headlines Monday morning with the announcement from the European Commission that the company’s iPad operating system should be defined as a “gatekeeper” under the European Union’s Digital Markets Act.
The law took effect last month, and aims to curb anticompetitive behavior from tech giants like Apple, Google parent company Alphabet (GOOGL), Microsoft (MSFT), and others.