Apple‘s decision to cut more than 600 employees in California speaks to the challenges facing the technology titan and affecting its stock price — and why analysts are divided over its outlook.
The iPhone maker is laying off or reassigning the workers as it reportedly pulls back from its electric vehicle and next-generation Apple Watch display projects.
At the same time, reports suggest Apple is looking into building robots that help people with household tasks. But some analysts have warned the initiative may be a costly distraction and might not bear fruit this decade.
“I put the probability that we see a product in the next 5 years at slim to none,” Gene Munster, the managing partner at Deepwater Asset Management, posted on X. “As a reminder Apple works on a lot of things that never see the light of day.”
Wedbush tech analyst Dan Ives struck a harsher tone in a CNBC interview this week.
“It would be a horror show if they actually spent money on robots,” he said. “They need to focus on AI. For Cook, his legacy is going to be AI. If they went after robots, that would be a black eye moment for Apple.”
Souring on the stock
Apple’s reported dismantling of two projects and teams, and its pivot toward personal robotic helpers, will only fuel concerns that the company has lost focus and fallen behind its Big Tech peers in critical areas like AI.
Worries that Apple has lost its way have weighed on its stock price. The shares have slumped 12% from their closing price at the end of 2023, cutting the company’s value by more than $300 billion.
In contrast, the S&P 500 has climbed nearly 8% this year, and arch rival and OpenAI investor Microsoft has advanced about 11%.
Microsoft is now worth about half a trillion dollars more than Apple at $3.1 trillion.
Other pressures on the stock include concerns about overvaluation, flagging growth, rising tensions and slowing sales in China, high-profile clashes with regulators in the US and Europe, and less defensive cachet among investors as recession fears fade.
Even so, Apple is a mainstay of many stock portfolios and unlikely to fall much further, Craig Johnson, chief market technician at Piper Sandler, told Bloomberg.
“Nobody wants to sell any more of their Apple positions because there’s a dividend, big share buybacks, and no one wants to pay capital-gains taxes on it,” he said.
Warren Buffett, whose Berkshire Hathaway conglomerate owns almost 6% of Apple, has hailed it as a “family jewel” and “probably the best business” he knows. The legendary investor has also praised the company’s buybacks as they’ve gradually raised Berkshire’s ownership stake without it spending a penny.
‘Attractive place’
Johnson echoed Buffett’s views in a Yahoo Finance interview. He praised Apple’s financial strength, solid profit margins, buybacks, and business model that drives repeat purchases. He also pitched it as a haven if stocks tumble.
“With a market that looks like it’s setting itself up for a good 5 to 10% correction, Apple looks like a pretty attractive place for people to park their money,” he said.
Apple stock may be under the cosh and the company might be a little lost, but analysts continue to see a world-class business navigating a tough period instead of a lost cause.
