On Friday, Apple’s shares managed to recover some of their earlier losses driven by the company’s projection of a lackluster holiday quarter. This turnaround followed a U.S. jobs report that raised optimism regarding a potential pause in interest rate increases by the Federal Reserve.

The stock experienced a 1.5% decline during early trading, after initially dropping over 3% before the market opened. The world’s most valuable company was on track to see a $40 billion reduction in its market capitalization if these losses were sustained.

Apple's shares managed to recover some of their earlier losses

A mobile phone shop in Nantes, France, displays an Apple iPhone 12, as seen on September 13, 2023.

On Thursday, the iPhone manufacturer forecasted sales for the upcoming holiday quarter, which is typically its strongest, falling short of Wall Street’s expectations. The company attributed this to sluggish demand for iPads and wearables.

The forecast heightened concerns about the overall holiday season demand, as various estimates, including those from the U.S. National Retail Federation and Deloitte, have indicated that rising inflation is likely to result in the slowest sales growth during this crucial shopping period in years.

Apple’s revenue expansion has come to a standstill in recent quarters, and it seems probable that this trend will persist throughout the next year,” stated brokerage firm Bernstein. They emphasized that the holiday quarter typically establishes the trajectory for Apple’s fiscal year, which extends until September.

Nonetheless, the stock received a boost following data indicating that nonfarm payrolls experienced a less substantial increase than anticipated in October. This development lifted shares across various sectors, with market expectations leaning toward a potential conclusion to the Federal Reserve’s interest rate tightening cycle.

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At least 14 analysts reduced their price forecasts for Apple, resulting in a decline of the median price target to $195, based on LSEG data. Currently, Apple is trading at nearly 26 times its 12-month forward earnings estimates, a valuation that is among the lowest within the group of stocks known as the “Magnificent Seven.”

D.A. Davidson analyst Tom Forte expressed skepticism, stating, “We interpret the management’s flat sales forecast as evidence that the company cannot rely on iPhone sales to boost its stock value, as it has done in the past.”

Despite this, the iPhone, which serves as Apple’s primary revenue source, witnessed a sales increase in the September quarter and is anticipated to continue this trend in the final quarter of 2023.

CEO Tim Cook also sought to reassure Wall Street about Apple’s performance in China, noting that the iPhone 15 models were performing well and setting a new quarterly record in mainland China. This helped alleviate concerns among investors that Apple was losing market share to resurgent local competitors like Huawei. “In mainland China, we set a quarterly record for the September quarter for iPhone,” Cook informed Reuters.

These remarks were well-received by several analysts, with Wedbush Securities analyst Dan Ives stating, “The Street will find comfort in this development.”

(Reporting by Aditya Soni; Editing by Shounak Dasgupta)

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