Apple (AAPL) shares slid after Barclays downgraded the stock to an "Underweight" rating and trimmed its price target by $1 per share. The analysts cited weakening iPhone sales and broader demand slowdown across Apple's product ecosystem after four straight quarters of declining revenue.
Chevron (CVX) announced it will take $4 billion in charges for the fourth-quarter related to increased regulatory and environmental liabilities, mainly stemming from California oversight of the oil giant's operations within the state.
Wells Fargo struck a bullish tone on Citigroup (C), naming it their top bank pick for 2024. Analyst Mike Mayo predicts Citi shares can double over the next three years.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
- You mentioned Apple, so let's stick with that one because that was certainly a weight on the stock market today. Sliding after Barclays downgrades that stock to underweight, lowers its price target by $1. Barclays citing a weakness in iPhone volumes and mix, while other hardware categories expected to remain weak.
So this is a big one, Julie, because you don't often see an analyst downgrade Apple to the equivalent of a sell. But Barclays did. They go to underweight. Time for a breather, they say. The target, 160. Bottom line, they say iPhone 15 sales are lackluster, their words according to their own checks. The next iPhone, the 16, which you would expect in September, they think will be more of the same. And as for Macs, iPads, wearables, they see a lack of a bounce back there.
- Interestingly, they pinpoint China in particular as one of the areas of weakness here. The biggest takeaway from the latest check says the note is incrementally worse. IPhone 15 data points out of China together with developed markets remaining soft, which was quite interesting.
Here's a little bit of anecdata. Love the anecdata. I just got a new phone, full disclosure. A new iPhone. I got the iPhone 15. I went in planning to get the 14. I got it from a Verizon store. I'm very transparent here.
- Yeah.
- And they said, if you turn in-- first of all, they had no stock of the 14, which tells me that there's more demand for the 14 right now than for the 15. Secondly, they gave me a deal on the 15. There was no such deal on the 14. So it seems like there are some incentives here to try to push out more 15. That was my very anecdotal reading between the lines.
- Yeah. Barclays could have surveyed Julie Hyman and just written the note off that. It's interesting because when you think about Apple, listen, it had a very strong 2023. The key question for investors is now how do they get this top line going after quarters in a row of declining sales? And when it comes to the US and China in particular, what is iPhone demand going to look like in the quarters ahead?
- Yeah. I have to mention, circling back to the discussion we had at the top of the show. The average price target for Apple according to Bloomberg data, $199.50 for the end of this year, which implies only about 3.5% upside. That's after the 48% gain that the stock saw last year.
So all of those Magnificent Seven are expected to have more muted gains. But I think besides Tesla, yep, that's the lowest number that we're expecting, at least analysts are expecting. That doesn't mean they're right, but it just tells you something about the expectations game.
Let's talk about Chevron as well, watching that stock. It's warning it's facing billions in charges for the fourth quarter. The company citing regulatory challenges and environmental liabilities. Now this hasn't particular to do with what's going on in California. The company says it's going to write down the value of $3.5 to $4 billion worth of assets.
And it's kind of a political story here. The shares are not affected that much. But basically, it says the California is overegulating the company. It says California regulations have resulted in lower anticipated future investment levels. By the way, Chevron is headquartered in California here. And the company says production in California has dropped 15% since the pandemic and now is only 3% of its output globally here. So basically, California regulatory does not have a very friendly stance towards fossil fuels, and so that's kind of what's at the heart of this issue.
- Yeah. And Bloomberg has a good write up too, just looking at the relationship between Chevron and the state of California, my home state. Noting it has been, I think we can call it, let's call it rocky. The state sued Chevron, said the company has kind of lied about climate change. Then Chevron shot back, disputed that of course, but did cut back on refinery investments, talked about a difficult business environment there. It hasn't been easygoing for Chevron. If you've been long that name, stock's down more than 10% in the past 12 months. Though most financial analysts, they do cover Chevron. They argue it's a buy here.
- And one more interesting thing here, it's not just California, by the way. There are old installations in the Gulf of Mexico that are now going offline. Even if Chevron doesn't own them anymore because of US law, not California law, because of US regulations, it still has to participate in the cost of cleanup for those now closed installations, which is interesting.
- It is interesting though because as you mentioned to begin with, the stock actually finished higher today. And I don't know if that's just because--
- Maybe not a surprise.
- Maybe not a surprise. Or it's good news, let's get it behind us. Or maybe they thought the number was going to be bigger. It was interesting reaction. Finally, shares of Citigroup getting a lift, as well as Fargo analyst Mike Mayo predicts Citi stock will more than double over the next three years. This comes as Wells Fargo named Citigroup its top pick for big banks in 2024.
So when Mike Mayo speaks, Julie Hyman, we know Mike, investors pay attention. Named Citi as top pick among the big banks at least for this year. Thinks shares can double over the next three years. His base case, it looks like, the stock rises to about 119 through 2026. So many investors don't want to hear about Citigroup, Mike was saying. But to Mike, that's actually this kind of bullish indicator. He likes that negative sentiment and says, OK, that actually-- I like that. It means probably a more favorable setup.
- Mike Mayo, both a well-known bank analyst and a well-known contrarian, right? So it's not surprising that he says the sentiment here is very bad. So I want to get in. JP Morgan had long been his favorite stock. He's talked up JP Morgan for a long time. Now Citi is his top pick for this year, as you mentioned. It replaces JP Morgan, which I thought was interesting.
All of this has to do with what Jane Fraser has been doing at Citigroup, which is a very involved restructuring that we have been talking about for months now, where it's involved moving around departments, cutting jobs as well. He says it's going to be simpler and more profitable as a result of the work that she is doing.
- Yeah. Equity analysts still actually kind of divided on this. 11, like Mike, say it's a buy here, but 17 are on the sidelines. As you noted though, Mike probably likes that.
