The year ahead for consumer electronics giant Apple looks to be one of incremental product updates as it slowly rolls out artificial intelligence features for the iPhone and other products. That lackluster outlook has been a wet blanket on Apple stock, which is down year to date ahead of its fiscal first-quarter earnings report.
Apple's latest smartphones, the iPhone 16 series, went on sale on Sept. 20 without AI features. The company billed the new handsets as "built for Apple Intelligence."
The first wave of Apple Intelligence applications debuted on Oct. 28, followed by a second wave on Dec. 11. But those AI applications are only for English-language users. The company expects to add AI features in other languages starting in April.
Analysts say the AI features haven't boosted sales of iPhone 16 handsets, which appear to be lagging 2023's iPhone 15 series.
"Frankly speaking, the Apple Intelligence rollout has been dismal, according to all accounts," Loop Capital analyst Ananda Baruah said in a recent report. The new Siri "is rife with issues and user experience has been extremely disappointing. The AI features to aid in writing have been received equally as poorly."
JPMorgan analyst Samik Chatterjee said investor concerns are mounting ahead of the company's fiscal Q1 report, scheduled for late Thursday.
"The concern heading into the earnings print is less about the quarter itself, and more so about the outlook," Chatterjee said in a client note.
He cited several concerns for Apple including smartphone market share loss in China, limited traction for AI features, and foreign exchange headwinds. Still, he rates Apple stock as overweight, or buy, with a price target of 260.
Zuckerberg Slams Apple
Meta Platforms Chief Executive Mark Zuckerberg issued a brutal assessment of Apple's performance during a podcast interview with Joe Rogan.
Zuckerberg criticized Apple for its lack of innovation and "squeezing people" for money. He said Apple hasn't invented anything great in roughly two decades, since Steve Jobs created the iPhone.
Now, analysts generally see Apple as playing catch-up on generative artificial intelligence, the biggest technology trend since the smartphone.
Apple also doesn't have an answer to Meta's popular smart glasses, Ray-Ban Meta eyewear. Some analysts say smart glasses could replace smartphones for many functions.
Year to date through Wednesday's close, Apple stock is down 10.6%. It ended the regular session Wednesday at 223.83. Apple reached an all-time high of 260.10 on Dec. 26.
Four weeks of declines have driven Apple stock below its 50-day moving average line, a key support level. It is now testing support at its 200-day moving average line for the first time since August. Apple hasn't traded below that level since last May.
Further, Apple stock has an IBD Accumulation/Distribution Rating of D-minus, according to IBD Stock Checkup. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The current rating indicates high-volume selling by institutional investors.
Apple Earnings Report Ahead
Investors are bracing for Apple's holiday-quarter sales report. Analysts polled by FactSet expect the Cupertino, Calif.-based company to earn $2.35 a share on sales of $124.4 billion. That would translate to year-over-year growth of 7.8% in earnings and 4% in sales.
Meanwhile, Apple faces the prospect of tariffs on its China-made products, which would raise its costs. President Donald Trump has threatened to use tariffs on foreign-made products to attract manufacturing back to the U.S.
Another overhang on Apple stock is a U.S. federal court case that could impact its lucrative search-traffic deal with Alphabet's Google.
In August, a U.S. District Court judge ruled that Google violated antitrust laws by engaging in unfair business tactics to dominate the internet search advertising market. A second phase of the trial is scheduled for April, Reuters reported.
Apple reportedly gets more than $20 billion annually from Google to make it the default search engine on iPhones.
Plus, Apple faces its own antitrust cases and investigations in the U.S. and Europe.
Smart Home Products In The Works
On the positive side, rumored new product categories from Apple could offer some surprises this year.
News reports indicate that Apple is working on several smart home products.
They include a small display that would act as a smart home hub. The touch- and voice-controlled device would connect with Apple's HomePod speakers, Apple TV set-top box, home security cameras and other devices. Consumers would be able to hang it on a wall or place it on a countertop, Bloomberg reported.
Apple also is considering making a product to compete with Amazon's Ring doorbell camera security system, Bloomberg said.
Plus, Apple is again investigating whether to make a television display, a project it abandoned years ago.
Next fall, Apple will release its iPhone 17 series smartphones. The new handsets are said to come with more capable processors and increased memory to support AI.
A new model, dubbed the iPhone 17 Air, is said to be Apple's thinnest handset ever at around 6 millimeters thick. By comparison, the standard iPhone 16 is 7.8 mm thick while the Pro models are 8.25 mm thick.
Analysts Debate Apple Stock
Barclays analyst Tim Long rates Apple stock as underweight, or sell, with a price target of 183.
Long expects Apple to post in-line December-quarter results with better services and Mac computer sales offsetting weak iPhone sales. He is more cautious on March-quarter guidance though as he believes estimates are too high.
Conversely, Wedbush Securities analyst Daniel Ives rates Apple stock as outperform, or buy, with a price target of 325. Ives said "fear in Apple is overdone."
"We believe the panic and bear frenzy around Apple is way overdone heading into December earnings," he said in a client note.
Ives added, "We have been here many times on Apple's stock over the last decade with the noise/bears piling on ... but that creates the opportunity to own this tech stalwart poised to enter its next phase of growth in 2025 in our view."
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
