Apple reported a decline in sales for the second quarter of fiscal year 2024, with revenue falling by 4% year-over-year to $90.8 billion. Despite this, earnings per share remained relatively flat compared to the previous year at $1.53. The company saw a significant drop in iPhone sales, which fell by almost 10% to $45.96 billion. This decline was attributed to a tough comparison with the previous year’s quarter, as well as slower demand in China where Apple faces increasing competition from high-end devices manufactured by Huawei. However, Apple’s Mac business experienced a slight turnaround, with sales increasing by about 4% driven by the launch of new MacBook Air models. Additionally, the digital services business performed well, with sales increasing by 14% year-over-year to $23.9 billion.
Despite the decline in sales, Apple’s stock price surged by about 6% in extended-hours trading following the earnings announcement. This was partly fueled by the company’s announcement of its largest-ever share repurchase authorization, which is expected to support the stock price. Apple stock has shown strong gains over the past few years, increasing by 35% from early 2021 to around $175. However, the stock’s performance has been volatile, with returns of 35% in 2021, -26% in 2022, and 49% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. Despite the volatility, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period, indicating a more stable performance.
Looking ahead, there is uncertainty surrounding Apple’s stock performance in the current macroeconomic environment, with high oil prices and elevated interest rates. It remains to be seen whether Apple will face a similar situation as it did in 2022 and underperform the S&P 500 over the next 12 months. Analysts value Apple at about $180 per share, which is roughly in line with the current market price. While the company’s growth may remain muted this year, there is optimism surrounding the potential upside from selling more premium products and increasing the mix of services. Apple also has a significant opportunity in the generative AI space, where it could potentially be a big winner due to its unique position in implementing AI on-device while maintaining user data privacy.
Apple’s strong stock performance and potential growth opportunities have been supported by its stock buyback program. The company’s board has authorized $110 billion in buybacks, up from $90 billion last year. This strategy is expected to further support the company’s share price and provide additional value to shareholders. While Apple has not made significant announcements in the AI space compared to its competitors, the company’s unique approach to AI implementation and data privacy could position it as a key player in the future. Overall, analysts believe that the combination of stock buybacks, potential growth opportunities, and a focus on premium products and services will continue to drive Apple’s stock performance in the coming years.
