Jim Cramer says Apple stock could fall another 5%. He also has no plans to sell it
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We knew Apple’s China market wasn’t great. But a new report Tuesday reveals demand is even worse than imagined as shares tumble to fourth-month lows. But, history has shown that the tech giant has been able to get out of these rough patches before — even if there’s still some more pain to go. Shares of Apple were sinking 3% to around $170 per share Tuesday afternoon — marking a seventh down day in the past eight sessions and taking the broader stock market down with them. Jim Cramer said the stock could fall another 5% to $160 in its current run of bad form. However, he has no plans to reduce the Club’s shares beyond the small trim on Jan. 2 to right-size a position that got too big following last year’s surge. Jim also maintained his “own it, don’t trade it” Apple mantra because the stock is “one of the greatest performers of all times.” AAPL 5Y mountain Apple 5 years Apple extended its decline into Tuesday after data showed iPhone sales in China experienced a double-digit percentage drop at the start of the year. Sales for the flagship device in China plummeted 24% in the first six weeks of 2024, according to Counterpoint Research . The report cited stiffening competition from lower-cost domestic smartphone makers, such as Vivo, Oppo and Xiaomi, as well as Chinese tech giant Huawei, which recently re-entered the market for higher-end devices. “There are periods where you have to suffer through,” Jim said, arguing Apple’s drop has been more of a trading lull rather than a sign of weak company fundamentals. “You have to wait it out.” This is not the first time we’ve heard concerns about Apple’s business in the world’s second-largest economy and a market that accounts for roughly 20% of overall sales. Major third-party Chinese retailers have been offering steep discounts on iPhone 15s in a bid to spur waning demand for the latest iteration of the device. Even worse, the deals come less than six months after launch. “The biggest problem with Apple is that they’re too expensive for China,” Jim said, adding that consumers there are pivoting to cheaper options across sectors on tepid economic growth. Club holding Starbucks has experienced a similar kind of struggle as local rivals such as Luckin Coffee grab share in the Chinese hot beverage market. China, however, has not been the only headwind for Apple. The European Commission on Monday issued a nearly $2 billion fine against the company for allegedly breaking competition laws in music streaming. The American tech giant plans to appeal the decision and said nothing is wrong with its business practices. Jim said this is typical of global regulators who see large U.S. companies as cash cows rather than looking for credible evidence around unfair practices. “Every six months, they ask for a check from our Big Tech companies,” he added. Before these latest issues, valuation questions were starting to emerge at the start of the year after Apple’s 48% increase in 2023. On the first trading day of 2024, Barclays issued a rare downgrade of Apple to sell rating from hold and shares fell 3.5%. The Club’s Apple trim that day was part of a sweeping profit-taking and portfolio management move across tech stocks that soared in 2023. All of this negativity has sent Apple into correction territory — when a stock or an index drops 10% or more from recent highs. Apple shares have shed roughly 14.5% from their all-time high of $199.62 each and nearly $3.1 trillion market value on Dec. 14, 2023. Over that time, nearly $455 billion in market value has been wiped out. Since the S & P 500’s close on Dec. 14, the broad market index has gained more than 7%. Bottom line Members may be wondering: With all this seemingly bearish news and underperformance, where’s the light at the end of the tunnel for Apple? Apple still has stellar fundamentals. There are plenty of catalysts down the line, including AI. The Club sees Apple’s upcoming generative artificial intelligence offerings as a key tailwind for shares. AI-integrated iPhones could ignite a strong upgrade cycle and help to offset China weakness. A note from Melius Research on Monday echoed those sentiments. During Apple’s annual shareholder meeting last week, CEO Tim Cook said he sees “incredible breakthrough potential for generative AI, which is why we’re currently investing significantly in this area.” Cook said he would share more details regarding AI-infused offerings later this year. That left investors to speculate that announcements could come during Apple’s annual developer conference in June. Cook’s remarks came one day after reports that Apple ditched its decadelong electric vehicle plans and shifted staff to work on AI. The CEO said Apple AI tech is already being used in the Vision Pro mixed reality headset’s hand-tracking tool. Jim has been bullish on the product’s eventual contribution to Apple hardware and services revenue. Cook also said there are AI capabilities in the Apple Watch’s heart rate alerts and some upcoming MacBooks. Just about a week after teasing those laptop AI capabilities, Apple announced on Monday that its latest M3 chips will be used in new versions of its MacBook Air models. Management described the product as “the world’s best consumer laptop for AI.” (Jim Cramer’s Charitable Trust is long AAPL, SBUX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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