Apple Stock Price in 5 Years: iPhone Maker Feels Heat as Warren Buffett Exits, China Woes Take Bite Out of AAPL Shares
Warren Buffett reduces Apple stake while the company faces issues in China. Despite these setbacks, Apple's long-term prospects remain strong. l Credit: Justin Sullivan/Getty Images
Key Takeaways
- Warren Buffett’s Berkshire Hathaway is boosting liquidity by significantly reducing its Apple stake.
- The company also faces sales issues in China before launching new products.
- However, the future seems to be positive for the AAPL stock.
Warren Buffett has made a surprising about-face in his investment strategy, slashing Berkshire Hathaway’s stake in Apple. The sudden liquidation comes as the tech giant grapples with a slowdown in iPhone sales, especially in China.
Following Berkshire Hathaway’s weight cut, Apple stock dropped by 5.3% on Monday, Aug. 5, 2024, to $208.58 per share.
Warren Buffet Sold Apple Shares
Warren Buffett-led Berkshire Hathaway has halved its stake in Apple, increasing liquidity to nearly $277 billion. The investment firm sold approximately 390 million Apple shares in the second quarter, on top of the 115 million shares it shed in the first quarter. As of June 30, Warren Buffett’s conglomerate held around 400 million Apple shares, valued at $84.2 billion.
Buffett, the 93-year-old billionaire and the tenth richest man in the world, has led Berkshire Hathaway since 1965. The company operates in various sectors, including insurance, railways, energy, real estate, and fast food. Despite his age, Buffett does not plan to step down soon, with Greg Abel poised as his successor.
Buffett’s first Apple investment in 2016 has yielded substantial returns, with the stock increasing by 800%. Apple remains his largest investment, alongside Coca-Cola and American Express. Buffett reaffirmed his confidence in Apple in May, stating it would stay their largest investment unless something dramatically changed.
However, amid a slowing US economy and soaring market capitalization, Warren Buffett appears to be taking a defensive stance by boosting Berkshire’s liquidity. He has also highlighted the importance of building cash reserves, suggesting that the company may redirect funds towards safer investments, such as T-notes.
Issues In China Hit iPhone Sales
Apple reported second-quarter earnings that surpassed estimates, though iPhone sales, its biggest revenue contributor, dipped by 1% year-over-year due to a continued decline in China. The company has lost market share in the country amid fierce competition from local rivals and weakened consumer spending.
Sales in China fell by 6.5%, significantly more than the anticipated 2.6% drop. Apple dropped out of the top five smartphone sellers in China for the first time, while local competitors Vivo and Xiaomi achieved double-digit growth in the same period. According to the International Data Corp, Apple’s market share in China decreased to 14% in the second quarter, down from 16% a year ago.
Apple Intelligence also garnered attention, with expectations that artificial intelligence adoption will further boost sales of new products. CEO Tim Cook hopes that Apple Intelligence will help the company’s sales.
He stated , “During the quarter, we were excited to announce incredible updates to our software platforms at our Worldwide Developers Conference, including Apple Intelligence, a breakthrough personal intelligence system that integrates powerful, private generative AI models into iPhone, iPad, and Mac. We look forward to sharing these tools with our users and continue to invest significantly in innovations that will enrich our customers’ lives, guided by the values that drive our work.”
What’s Next For Apple?
Apple could introduce the iPhone 16 lineup and new Apple Watch models in September 2024. The iPhone 16 will feature an Action button, a Capture button for landscape video, vertically arranged rear cameras, and a faster A18 chip. The iPhone 16 Pro models will have larger displays, a Capture button, a relocated mmWave antenna, an A18 Pro chip, an upgraded 48-megapixel Ultra Wide camera, and a 5x Telephoto camera on the smaller model.
Apple Watch X could also receive a major update for its 10th anniversary with a redesigned, thinner body, a magnetic band attachment system, and new health features such as blood pressure and sleep apnea monitoring. A new Apple Watch Ultra is expected to include new health features.
New AirPods 4 are anticipated to come out alongside the iPhone 16 lineup. Apple plans to debut two models with lower cost and Active Noise Cancellation (ANC). Both will feature a new design with shorter stems and an upgraded USB-C charging case with a built-in speaker for Find My.
From late 2024 to early 2025, Apple will begin updating the Mac lineup with M4 chips. The 24-inch iMac will be updated with the M4 chip, featuring improved performance for AI tasks. The MacBook Pro lineup will be refreshed with M4-series chips, with the entry-level 14-inch model receiving the M4 chip and the higher-end 14-inch and 16-inch models equipped with M4 Pro and M4 Max chips. The Mac mini is expected to be refreshed around the same time as the MacBook Pro. It will continue with M4 and M4 Pro chip options.
AAPL Stock In Five Years
Apple has delivered impressive gains over the past five years, with its stock soaring nearly 250%, significantly outpacing the S&P 500’s 77% rise. This remarkable performance is primarily due to the growing prominence of its high-margin services business. And to a robust smartphone upgrade cycle driven by the advent of 5G technology.
However, in 2024, Apple stock lost some momentum, declining by nearly 5% and underperforming the S&P 500.
Despite this recent dip, analysts project that Apple will sustain double-digit earnings growth of 11% annually over the next five years. Based on its fiscal 2023 earnings of $6.13 per share, its earnings could climb to $10.33 per share in five years. Apple’s five-year average forward earnings multiple is 28, slightly below the Nasdaq-100 index’s multiple of 29.5.
Assuming Apple maintains its 28 times earnings multiple and reaches $10.33 in earnings by the end of the forecast period, its stock price could rise to $289, marking a 57% increase from current levels. Apple currently trades at 28 times trailing earnings, so it offers a relative discount compared to the Nasdaq-100.
Investors seeking to add a dividend-paying tech stock to their portfolios should consider buying Apple now. In particular, as it appears poised to deliver strong gains over the next five years.
Apple Delays Launch of AI Features Raising Concerns Over iPhone 16 Roadmap
