Warren Buffett unloaded Apple, and the EU imposed fines. What is the outlook for Apple shares?

At the beginning of 2023, Berkshire Hathaway Inc. (NYSE: BRK-B) added 20 million shares of Apple Inc. (NASDAQ: AAPL), bringing their total holdings to 915 million, or 50% of the fund’s total portfolio. As of November 2024, the portfolio holds 300 million of the 915 million shares. Warren Buffett is actively reducing his Apple stake, preventing the stock from surpassing the all-time high set in July 2024. Additionally, the company had to pay a 10.2 billion USD fine imposed by the EU in Q3 2024, significantly impacting its net income. The European Union is not stopping here, and Apple is facing another fine that could constitute 10% of the company’s total annual revenue.

This article provides a comprehensive analysis of Apple Inc., including a fundamental analysis of its financial report, strengths and weaknesses, and a technical analysis of Apple stock. This thorough examination forms the basis for Apple’s stock forecast for 2024 and 2025.

About Apple Inc.

Apple Inc. is a US company founded in 1976 by Steve Jobs, Stephen Wozniak, and Ronald Wayne. Initially, it focused on manufacturing personal computers but later expanded its operations to become the leader in the consumer electronics industry. Apple is renowned for its innovative devices – the iPhone, iPad, Mac, Apple Watch, and AirPods – and its unique ecosystem, which integrates these products into its existing services.

Apple went public on the NASDAQ on 12 December 1980 under the AAPL ticker symbol. The company raised approximately 100 million USD, marking it as one of the largest and most successful initial public offerings of its time.

Consistent demand from investors drove up the value of Apple shares, eventually limiting the number of participants able to afford them. As a result, the company has conducted four stock splits in its history, each time lowering the share value and increasing the number of shares. In 1980, there were approximately 4.6 million shares in circulation; by 2024, this figure had exceeded 15 billion.

In addition to investor demand, Apple generates market demand for its shares through stock buybacks. This strategy enables the company to reduce the total number of outstanding shares, thereby increasing earnings per share for the remaining stock and making the securities more appealing to investors. Since 2012, when Apple introduced its share buyback program, the company has allocated approximately 700 billion USD to this initiative, making it one of the world’s leading companies in stock buyback volume, surpassing major corporations in other sectors.

The stock buyback is financed through free cash flow and low-interest loans.

Key revenue streams of Apple Inc.

In 2024, the company’s revenue came from the following streams:

• iPhone: the primary source of income, generating about half of the company’s total revenue due to its popular smartphone models
• iPad and Mac: earnings from tablet and computer sales for both personal and business use. Although their share of total revenue has declined, they remain a vital part of Apple’s business model
• Wearables, home goods, and accessories: revenue from sales of Apple Watch, AirPods, and other accessories, including MagSafe and apps for iPhone, Mac, and iPad
• Services: a rapidly expanding area that includes subscriptions to Apple Music, Apple TV+, iCloud, App Store, and other services. Services have become one of the company’s most profitable revenue streams
• Financial services: Apple is constantly improving its financial products, such as the Apple Pay payment system and the Apple Card credit cards, and actively expanded its offerings in this area in 2024
• Products for businesses and corporate services: Apple offers a range of devices and services tailored for corporate clients, including businesses, educational institutions, and healthcare organisations

Conclusion: based on the above, Apple generates revenue from manufacturing and selling hardware devices and earns from digital service subscriptions and commissions on App Store transactions.

Apple Inc.’s strengths and weaknesses

Apple has several significant advantages over its competitors that help it remain one of the world’s most successful and profitable companies:

• Strong brand and customer loyalty: Apple boasts one of the world’s most recognisable and valuable brands. User loyalty to Apple products is exceptionally high, with customers often staying with the brand for years, regularly upgrading their devices and increasing their overall expenditure on Apple products and services
• Unique product ecosystem: Apple has built an integrated ecosystem in which devices (iPhone, iPad, Mac, Apple Watch, and others) and services (iCloud, Apple Music, Apple TV+, and the App Store) work together seamlessly. This user-friendly system fosters loyalty and makes switching to competitors less appealing
• Control over hardware and software: the company rigorously analyses the performance of the products it launches, enabling it to design optimised and high-performing devices. This approach ensures high quality, security, and stability – advantages that are difficult for competitors relying on external suppliers and outsourced operating systems to replicate
• Innovation and design: Apple is renowned for its distinctive design philosophy and focus on user preferences. The company continuously invests in research and development to introduce exclusive features and deliver compelling designs
• High-margin products and services: Apple maintains stable profitability due to its premium pricing strategy and high-margin offerings. This approach allows the company to preserve financial stability while investing in future innovations, marketing efforts, and stock buybacks
• Focus on confidentiality and security: Apple pays special attention to protecting its customers’ personal data and keeping it private. The company has implemented advanced security measures in iOS and its other products, ensuring biometric safeguards for sensitive information while restricting data-sharing with external parties
• Diversified revenue streams: besides selling electronic devices, Apple actively develops services and financial products (Apple Pay, Apple Card). These ventures ensure a steady income stream even during potential declines in gadget sales

The above advantages enable Apple to sustain its market leadership despite intense competition from other technologically advanced companies.

Apple also faces several vulnerabilities that its competitors could exploit. These weaknesses are associated with specific aspects of its ecosystem and external factors, including antitrust investigations into the company.

• Reliance on closed-loop systems: the Apple ecosystem (App Store, iCloud, iMessage, and other services) operates on a closed-loop model, significantly limiting opportunities for its users. Competitors offering more open ecosystems (e.g. Android devices with a broader application selection) attract users who value feature diversity and freedom of choice. Antitrust authorities have also criticised Apple’s closed system for stifling competition
• High App Store commissions: the substantial fees imposed on App Store product developers have caused negative reactions from major players, including Epic Games (the developer of Fortnite), which accused Apple of excessive monopolisation. Many developers seek ways to bypass the App Store, potentially impacting Apple’s revenue. In addition, antitrust authorities are demanding changes to the App Store’s policies, which could reduce commissions and limit Apple’s control over its ecosystem
• Antitrust investigations: Apple is subject to numerous antitrust cases in the US, EU, and other regions regarding alleged monopolistic practices, particularly concerning the App Store and Apple Pay. If required to make significant changes to its business model, Apple may face reduced profitability and diminished control over its ecosystem
• Reliance on iPhone sales: Apple derives a considerable share of its revenue from iPhone sales. Despite attempts to diversify (through Apple Watch, AirPods, and services), reliance on the iPhone remains high. Competitors like Samsung Electronics Co Ltd and Xiaomi Corp offer alternative devices with innovative cameras, screens, and designs, posing a serious threat to iPhone sales. If interest in the iPhone declines, this would greatly impact Apple’s revenue
• Intensifying competition in the services and subscriptions segment: Apple is rapidly expanding its services and subscriptions segment (Apple Music, Apple TV+, iCloud, and Apple Arcade). However, it faces prominent rivals in this area, such as Netflix Inc. (NASDAQ: NFLX), Spotify Technology S.A. (NYSE: SPOT), Walt Disney Co. (NYSE: DIS) and others. These competitors offer more affordable and open solutions, which could lead to an outflow of users from Apple’s ecosystem if they are not bound to its devices

These vulnerabilities pose both external and internal risks to Apple. In particular, antitrust investigations jeopardise its control over the App Store and its policies on handling competitors. Hefty fines or a shift in its business model could significantly impact its profitability and market position. In Q3 2024, Apple paid a 10.2 billion USD fine imposed by the European Union, adversely affecting its profitability. The European regulator continues to monitor the company closely, with Apple facing the threat of a new fine that could amount to 10% of its total annual revenue.

Apple Inc. Q4 2024 report

For Q4 of the 2024 financial year, Apple reported strong financial results. Below are the key figures from the report:

• Revenue: 94.93 billion USD (+6%)
• Net income: 14.73 billion USD (-36%)
• Earnings per share: 0.97 USD (-34%)
• Operating profit: 29.59 billion USD (+9%)

Revenue by segment:

• iPhone: 46.22 billion USD (+5%)
• Mac: 7.74 billion USD (+2%)
• iPad: 6.95 billion USD (+8%)
• Wearables, Home, and Accessories: 9.04 billion USD (-3%)
• Services: 24.97 billion USD (+12%)

Revenue by region:

• Americas: 41.66 billion USD (+4%)
• Europe: 24.92 billion USD (+11%)
• Greater China: 15.03 billion USD (-1%)
• Japan: 5.92 billion USD (+8%)
• Rest of Asia Pacific: 7.38 billion USD (+16%)

Nearly all metrics, except for data from the Wearables, Home, and Accessories segments, demonstrated growth. However, the company’s net profit still dropped by 36%. This decline was due to a 10.2 billion USD fine imposed by the European Union. Excluding this one-off payment, the net profit growth in Q4 2024 would have been 8%.

The company provided a conservative forecast for the next quarter. Revenue is expected to grow in the low to mid-single digits year-on-year, service income is anticipated to reach double-digit figures, and gross profit is forecast to be 46-47%, 1-2% higher than the previous quarter.

Expert forecasts for Apple Inc. shares in 2024

• Barchart: out of 33 analysts, 18 rated the stock as a 'Strong Buy,' 4 as a 'Moderate Buy,' 9 as 'Hold,' and 2 gave it a 'Strong Sell' rating. The maximum projected price for the stock’s growth is 300 USD, while the minimum sell price is 184 USD
• MarketBeat: among 36 analysts, one assigned a 'Strong Buy' rating, 22 recommended 'Buy,' 11 suggested 'Hold,' and 2 gave a 'Sell' rating. The maximum projected price for growth is 295 USD, and the minimum sell price is 180 USD
• TipRanks: of 34 experts, 24 advised 'Buy,' 8 suggested 'Hold,' and two recommended 'Sell.' The maximum projected price for growth is 300 USD, while the minimum sell price is 184 USD
• Stock Analysis: of 33 professionals, 13 recommended 'Strong Buy,' 8 suggested 'Buy,' 10 rated it as 'Hold,' and 2 advised 'Sell.' The maximum projected price for the stock’s growth is 300 USD, while the minimum sell price is 180 USD

Warren Buffett sells Apple Inc. shares

In 2024, Berkshire Hathaway, managed by Warren Buffett, began significantly reducing its stake in Apple by selling the company’s shares. This move caught the attention of market participants, as Apple had been Berkshire’s most prominent position for several years, accounting for approximately half of its entire portfolio. In Q1 2024, Berkshire reduced its Apple stake by 116 million shares, followed by the sale of another 389 million shares in Q2. The selling continued in Q3, with a further 100 million shares sold. As of November 2024, Berkshire Hathaway’s portfolio holds just 300 million Apple shares.

Warren Buffett’s primary reasons relate to tax strategy. He expressed concerns about the potential for higher capital gains taxes. Buffet noted that the current tax rates make selling shares advantageous for protecting the interests of the company’s shareholders. Although Buffett emphasised that he remains confident in Apple, his decision to sell shares highlights Berkshire Hathaway’s cautious approach to the market amid economic uncertainty and increasing risks.

It is worth noting that Berkshire Hathaway’s cash reserves stood at 325 billion USD as of November 2024. Buffett may be preparing for a potential market downturn and accumulating funds to purchase shares of companies that could experience significant price declines.

Technical analysis and forecast for Apple Inc. stocks in Q4 2024

Apple shares are trading within an ascending channel on the daily timeframe and have reached the upper boundary, suggesting a potential corrective decline. However, when the price first reached the channel’s upper boundary in July 2024, the stock underwent a correction of 16% to the 195 USD level. Subsequently, growth resumed, and a trading range of 214-237 USD formed near the upper boundary, potentially paving the way for a further rise if the price breaks out above the range. Based on Apple’s current stock performance, two scenarios are possible:

1. The optimistic Q4 2024 forecast for Apple stock suggests a breakout above the 237 USD level, representing an all-time high, with the price rising further to 285 USD. The target was determined using a Fibonacci extension tool. This scenario can be considered the priority given experts’ predominantly ‘buy’ recommendations and the anticipated New Year rally in the stock market.
2. The negative Q4 2024 forecast for Apple stock foresees a breakout below the range’s lower boundary at 214 USD, followed by a decline to the 200 USD support level. This drop would be considered a correction within an ascending channel, as the trendline would remain intact.

Technical analysis and forecast for Apple Inc. stocks in 2025

On the weekly timeframe, Apple stock broke through a resistance line and formed a trading range above it, with boundaries at 214 USD and 237 USD. Based on the current performance of Apple stock on this timeframe, two forecasts for 2025 can be considered:

1. The optimistic 2025 forecast for Apple stock suggests a breakout above the range’s upper boundary at 237 USD, with the price rising further to the first target of 285 USD. Subsequently, a new ascending channel could form on the stock chart, allowing Apple shares to maintain upward momentum.
2. The negative 2025 forecast for Apple stock predicts a breakout below the range’s lower boundary at 214 USD, followed by a decline to 200 USD. If this level fails, the share price might drop to 165 USD. Some experts predict the decline’s trough could be around 185 USD. However, technical analysis also indicates a potential fall below this level.

Summary

The situation is ambiguous. On one hand, Apple is performing well, with growth noted across nearly all segments, and the company continues to increase its revenues. On the other hand, however, antitrust investigations negatively impact Apple’s net profit and could affect its business model in the future. If this happens, the amount of cash allocated for share buybacks will be significantly reduced, and this procedure is an essential source of support for the company’s stock. In the short term, there is still a chance to see Apple’s shares rise, but close monitoring of the company’s quarterly reports will be essential over the long term.

Donald Trump is more lenient towards the monopolisation of the market by large technology companies. Against this backdrop, Apple could reduce pressure from antitrust authorities.