Apple stock should improve, but not yet. The news Evercore ISI added Apple to its tactical best-performer list on Friday — a session after the stock had its worst performance since early August on reports pointing to iPhone softness in China. Analysts, however, argued that the stock is well positioned with lower expectations heading into Apple’s fiscal 2025 first quarter, released on Jan. 30 after the closing bell. The three-month period ending in December covers the holiday shopping season. Evercore expects an in-line print, “with continued growth and emerging market strength from Services and Wearables (new AirPods and Watch). Looking ahead to the March quarter, analysts said they “continue to expect a more strong and longer iPhone sales that could drive growth ahead of seasonality.” To be sure, Evercore pegged China as a “key card” for its upcoming fiscal first-quarter earnings release. Investors have been concerned about muted demand and increased competition in Apple’s second-largest market, which accounted for 15% of overall sales during its fiscal fourth quarter of 2024, the three-month period that ended in September The concern was reflected in Apple shares falling nearly 4% on Thursday after a research report from analysts at Canalys suggested Apple had fallen to third place in smartphones sold in China last year – behind domestic electronics makers Huawei and Vivo. Evercore acknowledged those concerns in its note to clients, but said overall equipment demand should remain steady. Evercore analysts reasoned that Apple’s push to expand its presence in emerging economies like India would add to China’s slowdown. Apple shares recovered nearly 1% on Friday. Big picture New research from Evercore and Canalys follows a weak start to 2025 for Apple. While it closed at a record high of $259 apiece on Dec. 26, the tech stock has been in decline since the new year. Thursday’s sharp decline, the worst one-day performance in more than five months, pushed the stock further into correction territory reached at Tuesday’s close. Even with Friday’s bounce, the megacap stock remained in a correction, defined by a decline of 10% or more from its recent highs. In 2025, Apple shares have lost more than 8% after last year’s 30% advance. The slide of Apple stock during the last days of 2024 and into 2025 reflects a similar pattern seen in late 2023 into 2024. Like the beginning of last year, when the Club sold some Apple shares, we also closed 2024 with a cut on Dec. 26, the stock’s record close. None of those small sales changed our “god, don’t trade” determination at Apple. Instead, these moves were in recognition of the fact that our position became too large relative to the rest of the portfolio. After all, we didn’t want to be greedy when we were sitting on such huge profits. AAPL 5Y mountain Apple (AAPL) 5 years Only time will tell if Apple will bounce back quickly in 2025 or continue lower for longer as it did last year. However, we anticipate a rally at some point. In 2024, the stock didn’t bottom out until late April in the mid-$160s before going into high gear for the rest of the year. China was also a major concern early last year. But Apple’s critics were silenced with a strong fiscal 2024 second-quarter earnings report in May. About a month later, the company unveiled its long-awaited artificial intelligence generation system, called Apple Intelligence, which turbocharged another rally that lasted until its latest record close on December 26. Apple Intelligence, which works with the latest iPhone 16 and iPhone 15 Pro and Pro Max models, has rolled out to users in operating system software updates. Since the first AI features weren’t available until after the iPhone 16 launched in September, there’s been some debate over whether a more gradual rollout helps lengthen the upgrade cycle, which the Club believes. Conclusion Despite Evercore’s short-term buy call, Jim is advising against buying Apple stock ahead of the earnings release. “There is a character of China that I don’t like,” he said on Friday. “Perhaps this can be resolved.” Jim agreed with Evercore’s predictions of a “stronger and longer iPhone cycle” and that there will be more upside in Apple’s Services business. But the stock is lagging for now because of the big run Apple had late last year. “We had a big increase that we shouldn’t have,” he said. Frankly, The Club expects a messy December quarter for Apple. As Jeff Marks, director of portfolio analysis for Investing Club, said Thursday: “The long knives are out for Apple, and valuations may need to come down a bit ahead of the iPhone maker’s earnings report on Jan. 30.” (Jim Cramer’s Charitable Trust is long AAPL. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY ALONG WITH OUR STATEMENT. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR ACCEPTANCE OF ANY INFORMATION PROVIDED IN CONNECTION WITH INVESTOR CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Apple CEO Tim Cook gives an interview at the Fifth Avenue Apple Store on New Product Launch Day on September 20, 2024 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
Apple stock should improve but not yet.
