Apple Is No Longer a Top Idea at Goldman Sachs. Could It Be a Lack of Clarity on AI? — Barrons.com

By Angela Palumbo

Apple stock has fallen nearly 8% this year and a move by Goldman Sachs to remove the tech giant from its “Conviction List” on Friday has only sent the shares lower.

Goldman Sachs analysts removed Apple from the U.S. Conviction List on Friday after the stock spent 274 days there. The list includes between 20 and 25 “of what we believe to be our most differentiated fundamental Buy ideas across our U.S. stock coverage,” the firm said.

Shares of Apple were down 1.5% Friday to $178.01.

Goldman Sachs didn’t clarify the exact reasoning for removing Apple from the list. In the research note, the firm said there are many reasons a stock could get removed, including a rating downgrade, price realization, the passage of catalysts, or the subcommittee believing there are better opportunities elsewhere.

Apple has been lagging its peers this year in the Magnificent 7 — the group of tech stocks leading the market higher thanks largely to excitement around artificial intelligence — owing to a lack of a clear AI strategy that could help to drive the stock higher. Apple has spent the year underperforming the market, with shares of the iPhone maker down 7.6% so far in 2024 while the tech-heavy Nasdaq Composite has gained 7.9%.

Chief Executive Tim Cook said on the company’s earnings call in early February that it when it comes to generative AI Apple continues “to spend a tremendous amount of time and effort and we’re excited to share the details of our ongoing work in that space later this year.”

Wall Street is now looking toward Apple’s Worldwide Developers Conference, scheduled for June, as an event at which the company likely will make long-awaited AI announcements.

But it isn’t just a lack of an AI strategy that has hit the stock. Sales in China dropped 13% to $20.8 billion in the December quarter from the previous year as Beijing’s economy has slowed and competition has increased with lower-priced, alternative smartphone options. Apple also hasn’t been immune to weak personal computer sales.

Goldman Sachs maintained its Buy rating and $232 price target on the stock.

Analyst Mike Ng said in the research note Friday that he “sees Apple’s installed base growth, secular growth in services, and new product innovation as more than offsetting cyclical headwinds to product revenue, such as a reduced iPhone unit demand from a lengthening replacement cycle and reduced consumer demand for the PC & tablet category.”

Write to Angela Palumbo at angela.palumbo@dowjones.com

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