by Shares of Apple (AAPL) are trading lower after a report from Counterpoint Research showed that iPhone sales in China declined within the first 6 weeks of the year. The company also recently received a $2 billion fine from the European Commission for violating antitrust rules.
Ben Bajarin, CEO of Creative Strategies and Principal Analyst, joins Yahoo Finance to discuss the rightful concern for Apple investors amid the negative headlines.
Although Apple’s recent release of iPhones was not enough for consumers to upgrade this cycle, Apple’s retention and loyalty in the Chinese market “is the highest of any brand,” Bajarin explains: “I think there was a huge debate there in terms of will… iPhone consumers in China wait, even push their upgrade cycle even longer towards the end of the year hoping that some AI gen things will come for Apple in the next platform launch, so I think a little so there. To your point, which is correct, the criticism has been made that the iPhone hasn’t been that big of a year-over-year upgrade to really move a cycle. that sales are gone, it’s just that it’s delayed on sales.”
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Note to editor: This article was written by Nicholas Jacobino
Video transcript
JOSH LIPTO: Now checking in on one of the great names Seven, Apple shares are falling on a report from counterpoint research that shows a decline in iPhone sales in China in the first six weeks of the year. This follows yesterday’s news of a $2 billion EU antitrust fine, with Apple shares sliding to their lowest level in about four months. Join us now to talk all things Apple Ben Bajarin, creative strategists and CEO and chief analyst. Ben, it’s always good to have you on the show.
So let’s start that headline today, Ben. So listen, the stock is down again today. And this headline from counterpoint research seems to be saying that iPhone sales have declined. According to their research, 24% in the first six weeks of the year. Huawei’s rival, Huawei says they are going the other way unit sales actually rise more than 60%. How concerned, Ben– if you’re reading this, you’re an Apple investor, how concerned are you — how concerned are you about that headline?
BEN BAJALIN: Yes. I mean, don’t worry too much, I think most of the investors we talk to will take the long view in iPhone sales. I think the quarter over quarter fluctuations, people understand that there is still broad soft in China, especially at the high end. I think if you look at some of the sales that are happening there from local brands, even some of the rise from Huawei is not entirely in the high end. And I think most people who look at some of the underlying data and know that Apple’s retention rates—so loyalty and intent to buy iPhones in the future are at the highest level of any brand.
And I think we’re continuing to see some of this slowdown in the high-end renewal that we’ve seen over the last couple of quarters in China. And on top of that, I think it’s becoming very clear again that the renewal rates in China, especially in the high rates, are increasing and that’s having a big impact on everyone. But to this point again with Huawei, it’s not like they’re taking a share from Apple, they’re again – they’re recovering from a very small base after the sanctions that hit them.
So, as I said, I think that everyone has the long view. And within that view, it looks like things will normalize and be relatively stable in terms of China’s prospects for the year.
JOSH LIPTO: I’m interested to push that point, however, Ben, China is a critical market for Tim Cook. But when they reported last quarter in December, Chinese sales were down 13% year over year. So I guess, when do you see that changing there? Is that close to mid term?
BEN BAJALIN: Yes. I think there was hope that we’re starting to see some of that recovery probably from March to the middle of the year. And then of course it goes soft again right on the heels of new iPhone launches. There is obviously a lot of discussion about how many predictions there are for the next iPhone. I think there’s a huge debate going on, will consumers– iPhone consumers in China, even push their upgrade cycle even further towards the end of the year in the hope that some GenAI stuff will come for Apple in the next platform launch.
So I think there’s a little bit of that, I mean, of course, to your point, which is correct. I think the criticism that the iPhone was just so much of an upgrade year-over-year is enough to really move a cycle. I think, again, I keep coming back to this. This does not mean that sales are gone, it is just that sales are delayed. And so I think we’re seeing some hope that that’s exciting now. But of course I think there will be a big spotlight in the fall on how Apple integrates AI and what the next iPhone could be in terms of satisfying more of that pent up demand that we feel is in China.
