Apple Shares Pare Losses as US Jobs Report Raises Hopes of Fed Pause

Apple’s shares saw a rebound in response to a favorable U.S. jobs report that suggested a potential halt in Federal Reserve interest rate hikes, after initially tumbling following a subdued holiday quarter forecast.

In early trading, Apple’s stock was down by 1.5 percent, having experienced a more substantial drop of over 3 percent before the market opened. This decline had the potential to cost the world’s most valuable company around $40 billion (nearly Rs. 3,32,630 crore) in market value, provided the losses were sustained.

The tech giant had announced a holiday quarter sales forecast that fell below Wall Street estimates, citing weak demand for iPads and wearables. This announcement raised concerns about broader holiday demand, particularly in light of estimates indicating that sticky inflation could lead to the slowest rise in sales during the crucial shopping period in years, as projected by organizations like the U.S. National Retail Federation and Deloitte.

According to Bernstein, a brokerage firm, Apple’s revenue growth has been stagnant over recent quarters, and this trend is expected to continue over the next year. The holiday quarter typically sets the tone for Apple’s fiscal year, which runs until September.

Despite these challenges, Apple’s stock found some support following the release of data indicating that nonfarm payrolls had risen less than expected in October. This development boosted shares across various sectors, with market participants speculating that the Federal Reserve might consider ending its ongoing cycle of rate tightening.

Multiple analysts adjusted their price targets for Apple, with the median price target decreasing to $195, according to LSEG data. Apple’s current trading price stands at nearly 26 times its 12-month forward earnings estimates, which is among the lowest in the group of stocks known as the “Magnificent Seven.”

Analyst Tom Forte of DA Davidson noted that Apple’s flat sales guidance suggests that the company cannot rely solely on iPhone sales to drive its shares higher, as it has in the past. However, sales of the iPhone, Apple’s primary revenue source, showed growth in the September quarter and are also anticipated to rise in the last three months of 2023.

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Apple’s CEO, Tim Cook, also emphasized the success of the iPhone 15 models in China, dispelling concerns on Wall Street that Apple was losing market share to local competitors such as Huawei. Cook mentioned, “In mainland China, we set a quarterly record for the September quarter for iPhone,” which was positively received by several analysts.

Wedbush Securities analyst Dan Ives commented, “The Street will breathe a sigh of relief on this front,” in response to Cook’s statements, indicating a sense of confidence in the company’s performance in the Chinese market.

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