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Consumer Staples

Apple Stock Analysis: Bernstein Upgrade Signals Potential Turnaround

Apple (AAPL) $174 

Apple had an upgrade from Bernstein this morning after a spate of bad news, notably weaker China sales, and fewer iPhone sign-ups in the US. 

“AAPL has de-rated significantly amid a weak iPhone 15 cycle and fears that Apple’s China business is structurally impaired,” analyst Toni Sacconaghi wrote in a note. “We believe prevailing weakness in China is more cyclical than structural and note that historically Apple’s China business has exhibited much higher volatility than Apple overall, given its very feature-sensitive installed base.” Sacconaghi raised his rating on Apple to Outperform from Market Perform and kept his $195 price target.

While Sacconaghi acknowledges there may be short-term headwinds for Apple, the potential use of generative artificial intelligence features in the next iPhone and tailwinds from the replacement cycle could set up the company “well,” he said. It’s possible the company could top 2025 estimates of $416.9B in revenue and $7.40 in earnings per share, Sacconaghi said.

There are other positive developments.

A possibility of a tie-up with Open AI/Google Gemini for a co-pilot. Apple does have a treasure trove of data, there is no way they haven’t thought about monetizing it with AI. I suspect they are fairly advanced in the process but are as secretive as ever.

Nvidia’s omniverse is to be used with the Vision Pro – to be sure this is not revenue accretive, as the Vision Pro is still likely two years in beta before the product even becomes useful and less of a novelty. It is a step in the right direction for better use cases / commercial or other applications.

Apple steadying out around $167-$170 is a good sign for the rest of the market. They report on Thursday after the market, and while the quarter should be weak, the guidance should be key, along with product announcements or hints for announcements in their June developer conference. I don’t think they should be written off yet.

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Stocks

Tesla Surges 14% on FSD Approval in China: Key Win for EV Giant Amidst Rising Competition

Tesla (TSLA) $193 up 14%

Good news for Tesla – Musk’s China visit seems to have paid off. The markets and the street love it and it’s great for those of you who had the patience to hold on to it. 

One of the key reasons for the approval seems to be the collaboration with Baidu, plus China was very keen for a win. Nonetheless, this is good for the market. Two heavyweights Apple and Tesla are seeing support.

Read on from Barron’s today.

https://www.barrons.com/articles/tesla-stock-price-news-china-elon-musk-8476fa2e?mod=BRNS_ENG_NAS_EML_BULLETIN_AUTO_NAH

Tesla Stock Soars on FSD Approval in China. 

3 Reasons the News Is a Big Deal.

According to Barrons “The win does a few things for Tesla. For starters, better driver-assistance products can mean more demand for Tesla vehicles in China. Second, it demonstrates the company can navigate complicated government regulations related to driver-assistance technology. And third, it shows that Tesla has increasing confidence in the quality of its self-driving car technology.”

“We expect this announcement to lead to a near-term uptick in FSD attach rates—which we currently model at about 10%—and improve the offering longer-term,” wrote Baird analyst Ben Kallo in a Monday report. Attach rates refer to how many people buying Tesla vehicles also buy FSD. “We also view this announcement as a potential pathway for Tesla to follow for entering new markets.”

“While the long-term valuation story at Tesla hinges on FSD and autonomous, a key missing piece in that puzzle is Tesla making FSD available in China which is now a done deal,” added Ives. “This is a key moment for Musk as well as Beijing at a time that Tesla has faced massive domestic EV competition in China along with softer demand.”

To help win Chinese approval for FSD, Musk needed to assuage regulators’ concerns about data security risks. To that end, he agreed to use navigation and mapping functions provided by Chinese firm Baidu BIDU 5.77%, the Journal said.

Baidu’s American depositary receipts, or ADRs, were up 4.1% in early trading at $104.65 apiece.

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Technology

Understanding Apple’s Antitrust Case: Bernstein’s Analysis and Market Implications

Apple (AAPL)

I don’t believe there is any reason to panic, I agree with Bernstein’s reasoning below.

It will take years and the outcome will be limited.

Apple (NASDAQ:AAPL) was sued by the U.S. Justice Department in a landmark antitrust case amid concerns about monopolization in the smartphone market, something Apple has vehemently denied.

While the case is likely to play out in the judicial system for years, investment firm Bernstein does not believe it will have much of a financial impact on the tech giant.

“While the DoJ’s charges are focused on iPhone, we do not see likely remediation as materially impacting Apple financially or undermining the iPhone franchise: worst case, Apple pays a fine, and loosens restrictions for competition across the iOS platform, which we believe will have limited impact on iPhone user retention or on Services revenues,” analyst Toni Sacconaghi wrote in a note to clients.

Sacconaghi believes any outcome is likely to take some time, likely between three and five years, given historical precedent from Microsoft (MSFT) and Google (GOOG) (GOOGL). And while it may not undermine Apple’s iPhone franchise, it could result in competitors having access to Apple’s APIs and ecosystem, level the playing field for future devices and result in some “regulatory overhang” for the stock.

“We think the DoJ creates some regulatory overhang on the stock, but see limited to no impact over the next several years,” Sacconaghi added.

Categories
Technology

Apple, (AAPL), Still A Hold.

source:apple technology

Apple, (AAPL) – $170 Hold 

The recent drop, especially today, has been because of weak iPhone sales in China, which fell 24% year-over-year in the first six weeks of 2024, amid rising competition from Chinese rival Huawei Technologies, Counterpoint Research said. There’s a lack of consumer confidence in China, and several attempts to kickstart their economy have not succeeded; If it goes into a deflationary spiral, this problem could continue for a few quarters before bottoming out.

Getting out of the car project was a good idea, even if they wasted a decade and billions of dollars, but that’s no longer a drain, and diverting that to AI development is absolutely necessary, even if it is a little late.

The stock should remain sideways and sluggish for a while, but this is not a trading stock, it’s a long term investment, which doesn’t quite give blockbuster returns but is a steady performer. I’m not planning to sell any and will revisit if it falls further.