Apple Stock Dips on China Discounting, Revised UBS Outlook

Apple's stock price (AAPL) dipped into the new year, falling 2.62% in the first session of 2025 following a bearish outlook from UBS, along with news of discounting on iPhones in China. UBS's rating adjustment reflects concerns about Apple's flagship product, the iPhone, which is a critical revenue driver for the tech company, with China discounting adding some weight to the narrative.

The stock remains the largest market cap name at $3.69 trillion, yet has not been immune to a slight risk off move in recent days, with the cumulative 5 session decline now standing at 5.61%. Discounting in the latest iPhone is not common, and a 500 yuan, or $68.50 cut on Chinese sales will hit margins, but is seen as a necessity to fight local competition.

Apple's iPhone has been a significant revenue generator, contributing approximately 50% to the company's total annual revenue. This underscores the vital role the product line plays in Apple's financial health and market performance. Any negative sentiment or performance issues related to the iPhone can significantly impact the company’s stock price.

The downgrade by UBS is primarily driven by anticipated challenges in maintaining sales momentum for the iPhone. This anticipation is reflective of potential market saturation and increasing competition in the smartphone industry. These factors could hinder Apple's ability to post substantial growth figures in upcoming fiscal quarters. The firm sees December iPhone unit and revenue estimate dropping to 74 million (from 77 million) and $67.2 million (from $69.7 million).

Whilst UBS' price target of $236 remained in tact, the firm made a 2% downside revision in December quarter revenue estimate to $120.8 billion (from $123.3 billion), with an EPS range of $2.25 to $2.31. More of concern to markets may have been that both revised marks are below the consensus of $124.9 billion, and earnings per share of $2.36

Despite the current dip in stock value, Apple remains a formidable player in the tech industry, with diverse product lines and a loyal customer base. Future growth prospects could be bolstered by other divisions within the company, including services and wearables, which have shown promising growth trajectories in recent reports.