Apple Inc (NASDAQ:AAPL) saw its market value close below US$2 trillion Tuesday for the first time since June 2021 after shares in the tech giant were hit by a downgrade by Exane BNP Paribas, which added to concerns that slowing economic growth would hit demand.
The move comes only a year after the iPhone maker became the first company to reach the $3 trillion market capitalisation milestone.
Those heady days seem long gone as Apple shares fell further on the first trading day of 2023 as Exane analyst Jerome Ramel downgraded the company to 'neutral' from 'outperform', as well as cutting his price target to $140 from $180.
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Ramel also cut his iPhone shipment targets for fiscal 2023 to 224 million units from 245 million units, reflecting supply chain issues from manufacturer Foxconn and consumers cutting back spending on high-end phones.
At Apple's current stock price, the company is worth around $1.98 trillion, just ahead of Microsoft Corporation, currently valued at $1.78 trillion.
Investors are worried that a slowing economy and soaring inflation will dent demand for Apple’s devices as consumers pare back on spending on high value goods, delay upgrades, or both.
Asian demand weakening
Reports from Asia suggested Apple has notified several suppliers to build fewer components for AirPods, the Apple Watch and MacBooks for the first quarter, citing weakening demand.
This slowing demand could be confirmed in quarter one results in the coming weeks, which according to Refintiv are expected to show a 1% drop in revenues which would be Apple’s first quarterly decline since the March quarter of 2019.
Apple is not alone. Last year's steep sell-off on Wall Street punished a number of other tech heavyweights including Microsoft, Amazon.com Inc, Alphabet Inc, and Meta Platforms Inc, taking their combined valuations to just 18% of the S&P 500, down from as much as 24% in 2020.
But it’s not all bad news. Even after its 27% drop last year, Apple has provided stellar returns to long-term shareholders.
Investors who bought and held Apple shares when co-founder Steve Jobs launched the iPhone in 2007 have enjoyed a gain of over 4,000%, not including dividends, compared to a 180% gain in the S&P 500 over the same period.
-- Updates with Asian trading reports --
Contact Jeremy at jeremy@proactiveinvestors.com