Apple flexes its new No. 1 smartphone maker status and makes a rare move in China
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Apple became the world’s largest smartphone maker in 2023 for the first time ever. Despite a rough start to 2024, we think the company can build on this momentum in the U.S. and China. The iPhone creator overtook tech behemoth Samsung in market share last year. Samsung’s Android-based devices have been consistently No. 1 since 2010. Apple’s frontrunner status was confirmed in separate industry research reports from International Data Corporation (IDC) on Monday and Canalys on Tuesday. The flip, which does not surprise us and was a long time coming, happened during a year when the overall smartphone market softened a bit and competition in China heated up. “Apple’s ongoing success and resilience is in large part due to the increasing trend of premium devices, which now represent over 20% of the market, fueled by aggressive trade-in offers and interest-free financing plans,” said Nabila Popal, research director with IDC’s Worldwide Tracker team. “All this despite facing increased regulatory challenges and renewed competition from Huawei in China.” Shares of Apple soared 48% in 2023. But, like many of last year’s Big Tech winners, it has declined early in 2024. A raft of recent downgrades and cautious analyst research has not helped sentiment around the stock either. Wall Street likes to pile on when shares hit a rough patch — which, this time, saw Apple recently lose its most-valuable-company-in-the-world crown to Microsoft . AAPL 5Y mountain Apple 5 years However, Apple is not going anywhere. The iPhone continues to attract new buyers because of its quality and closed ecosystem, which prioritizes privacy and security. Don’t forget, that once a user has invested in the Apple ecosystem, the switching costs can be prohibitive. To be sure, Apple’s iPhone is facing intensified competition in China as domestic players like Huawei and Xiaomi have started offering high-end alternatives. But, the firm has been trying to offset any potential weakness in sales by expanding its presence in other emerging markets like India. Most recently, in an aim to boost China sales, Apple is making the rare move of offering limited-time iPhone 15 discounts , starting Thursday, in the company’s second-largest market, which accounts for about a fifth of overall revenue. The deal will run from Jan. 18 and Jan. 21 ahead of the Lunar New Year in China and gives customers 500 Chinese yuan, around $70, off of its newest flagship smartphone. We see this pricing move in China as a sign that management is trying to reinvigorate sales in a sluggish market during an important shopping holiday. But questions remain. Will Apple have enough strength in other markets to offset what could be a weaker China? Furthermore, will excitement around its upcoming mixed-reality headset — the pricey $3,500 Vision Pro —be enough to shift the narrative and importance away from iPhones? Financially, the Vision Pro won’t be enough to offset expected near-term iPhone weakness. But if the headset sees strong demand right out of the gate, it could prove to be a positive for the stock from a sentiment perspective. Investors could get more clarity on what it means for Apple three to five to 10 years out. After all, the Vision Pro is Apple’s first new product category since the Apple Watch launched in 2015. A successful headset in the years to come will only add more of a reason for users to engage in Apple’s ecosystem, which will boost recurring revenue in its high-margin services segment. The Club did trim some Apple, and other 2023 winners, at the start of the new year on the general premise that huge gains couldn’t continue without a breather. Some of the positions, like Apple, needed to be right-sized. Offloading a small number of shares of the iPhone maker, along with a handful of other tech names, did not change our bullish outlooks on each. Our “own it, don’t trade it” mantra on Apple, which we do maintain, does not mean to never sell. In our case, Apple’s rally last year boosted the stock’s weighting in the portfolio to well above the 5% position size we aim for. The sale brought it closer to 5%, and we took some profits as a bonus. (Jim Cramer’s Charitable Trust is long AAPL, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A woman walks near the Apple store in New York, U.S., December 26, 2023.
Eduardo Munoz | Reuters
Apple became the world’s largest smartphone maker in 2023 for the first time ever. Despite a rough start to 2024, we think the company can build on this momentum in the U.S. and China.
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