Apple Inc. is on the cusp of revealing a 3% uptick in iPhone sales during the pivotal holiday season, showcasing its most robust growth in the last five quarters. Nevertheless, analysts are anticipating headwinds for the tech giant in the Chinese market, attributing this to regulatory challenges and resurgent competition from Huawei.
Apple iPhone 15 vs. Samsung Galaxy S24 and Huawei Innovation
Turning attention to Wall Street, the imminent showdown revolves around Apple’s latest flagship, the iPhone 15. This clash puts it in direct competition with Samsung Galaxy S24, armed with generative artificial intelligence features, and a Huawei phone propelled by an in-house crafted chip. The infusion of generative AI functionalities is expected to be the deciding factor in the contest for the title of the world’s largest company in the coming year.
In recent trading sessions, Microsoft Corporation (MSFT.O) has outpaced Apple, reaching a noteworthy $3 trillion valuation. Analysts are confidently predicting Microsoft to strengthen this lead as it continues to introduce products laden with artificial intelligence.
Despite Apple’s shares witnessing an almost 50% surge last year, it stands as the smallest gainer among the so-called Magnificent Seven stocks. The company grapples with challenges in the Chinese market, with the property sector facing issues and signals from Chinese officials indicating a waning preference for iPhones in governmental circles.
The December quarter witnessed a 2% dip in iPhone shipments to China, as reported by market research firm IDC. Analysts attribute this dip to the resurgence of Android phones, fueled by Huawei’s popularity, posing a formidable challenge to Apple.
Ming-Chi Kuo, a prominent analyst from TF International Securities, anticipates structural challenges for the iPhone in 2024, foreseeing a significant decline in shipments. Factors contributing to this decline include a new paradigm in high-end mobile phone design and the persistent decrease in shipments in the Chinese market.
The forthcoming first-quarter results for Apple are expected to underscore growth in its services segment, encompassing revenue from the App Store, Apple TV, and Apple Music. Services segment revenue is estimated to have surged by 12.5% in the quarter concluding in December.
However, the App Store faces obstacles in Europe due to impending legislation that will compel Apple to permit developers to bypass its payment systems and associated commissions, starting in March.
In the broader picture, Apple is projected to report a marginal 0.7% uptick in quarterly revenue, breaking a streak of four consecutive quarters of decline. Nevertheless, Bernstein analysts foresee a 3% descent in iPhone sales in 2024, providing only a modest boost to overall revenue.
Apple’s latest endeavor, the Vision Pro, considered its riskiest move since the inception of the iPhone over a decade ago, became available for pre-orders in the U.S. on January 19. Analysts, however, do not anticipate it to be a significant revenue driver in the current year.
Angelo Zino, an analyst from CFRA Research, suggests that greater clarity on GenAI initiatives, a successful Vision Pro rollout, and updated capital allocation policies could act as potential catalysts for Apple over the next six months.
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