Apple Rebound Looks Elusive as AI Woes Draw Investor Scrutiny

Written by

admin

in

(Bloomberg) — Apple Inc.’s earnings report is unlikely to give investors the catalyst they’ve been looking for to revive the iPhone maker’s struggling stock price.

Most Read from Bloomberg

The technology behemoth is expected to post profit and revenue growth that severely lags the industry when it reports its fiscal third-quarter results Thursday after the market closes.

Apple shares are down almost 17% this year. Compounded by the lack of a strong artificial intelligence strategy, high exposure to tariff risk and regulators targeting its highly profitable relationship with Alphabet Inc., it’s hard to see them rebounding any time soon — especially as they continue to trade at a premium valuation.

“Apple’s embarrassing AI shows how it has lost its mojo with innovation, and the lack of innovation speaks to the lack of revenue growth, and that speaks to why we don’t see upside in the stock,” said Peter Andersen, founder and chief investment officer of Andersen Capital Management. “It is valued like a growth stock, but I’m very skeptical about the potential for a significant inflection in growth, and I think it will eventually lose that premium.”

Analysts expect the company to report a 2.4% rise in quarterly profits on a 4.1% gain in revenues, according to data compiled by Bloomberg. The overall tech sector’s anticipated earnings growth is 16.8% on a 13% jump in revenue, according to Bloomberg Intelligence.

The stock dipped 0.2% on Thursday.

This helps explain why Apple is among the 15 worst-performing stocks in the Nasdaq 100 Index this year and why it lags every one of the Magnificent Seven tech giants other than Tesla.

But even with this year’s slide, Apple’s stock still trades at almost 28 times estimated earnings, higher than its 10-year average of 21. The shares are pricier than the Nasdaq 100 as well as megacap peers that are far better positioned in AI, like Alphabet, Meta Platforms, and Amazon.com Inc.

Negative Sentiment

The combination of tepid growth and a high valuation is why sentiment toward the one-time consensus favorite has become “fairly negative,” according to Bank of America. In a sign of their historically weak momentum trends, shares have been below their 200-day moving average since March 10, a 98-session streak — as of Wednesday’s close — that matches its longest since February 2023. Should it close below the key technical level on Thursday, that would represent its longest streak in almost a decade.

Continue Reading

More posts