Apple's bad quarter and what history says will happen next

Published Thu, Mar 28 202410:00 AM EDTUpdated Thu, Mar 28 202411:22 AM EDT

Apple is wrapping up a rough quarter, but history and Wall Street analysis show there is reason to expect a bounce ahead. The technology giant has dropped more than 4% in March alone, bringing its first-quarter loss to nearly 10%. Meanwhile, the tech-heavy Nasdaq Composite has climbed almost 2% in March and above 9% during the three-month period. But that underperformance could come to an end. Apple shares have typically risen following a quarter that ends down at least 10%, according to CNBC Pro data. Wall Street consensus forecasts imply the stock could be in for a bounce. The stock has struggled after the U.S. Department of Justice filed a lawsuit against the company last week. In what is expected to be a landmark antitrust case, regulators said Apple has created a monopoly within the smartphone market. AAPL 3M mountain Apple over the last three months That added to investor jitters seen earlier in the quarter after iPhone demand was called into question as the Chinese economy struggles. In fact, Counterpoint Research found iPhone sales there dropped 24% in the first six weeks of 2024. Concerns about long-term demand for the Vision Pro have heightened worries around interest for products. Elsewhere, the stock appears to have missed much of the hype given to competitors for their artificial intelligence plans. Now, market participants appear to be waiting for clues or announcements on the topic, with many expecting news during Apple's developers conference in June. 'Best bought on weakness' Despite the tough period, Wall Street sees reason for optimism ahead. Nearly 2 out of every 5 analysts rate the stock a buy, with the average price target implying a bounce of more than 15%, according to FactSet. Mahoney Asset Management CEO Ken Mahoney acknowledged that Apple was a "controversial" pick given its recent challenges. But Mahoney said the stock could once again test all-time highs — which would require a gain of about 18% — if it can enter the AI space and find ways to monetize. A sell-off should actually be viewed as a good entry point, he added. Apple "is a stock best bought on weakness in general as they probably have the best, or one of the best management teams in the world," Mahoney said. "It is not a trade for the faint of heart and needs a longer time horizon, but certainly, this is not a company that is going away any time soon." Melius Research analyst Ben Reitzes is even more bullish, expecting the stock to rally almost 27% and notch a new record at $220. That target is based on a multiple of 30 times the firm's per-share earnings estimate of $7.35 for the full 2026 year. Similar to Mahoney, Reitzes said his outlook depends in part on the company's ability to meaningfully break into the AI space, something he is hoping to see information on at the developers conference . "This target multiple places Apple at a modest premium to elite consumer products companies, who lack Apple's installed base, recurring revenue and AI upside long-term," Reitzes wrote to clients Monday. "Apple needs to do a lot to get there — like stabilize China and get through the challenges to growth overall in C1H24. However, if it can deliver a new narrative in AI, we still think it can more than make up for many obstacles." Until the June conference, he said Apple leaders "deserve the benefit of the doubt." Others anticipate a more muted gain. Following the Justice Department news, HSBC analyst Nicolas Cote-Colisson kept his hold rating and target price of $180, which implies an upside of just under 4%. Good historical indicators History can also provide justification for bullishness on the stock. After quarters over the past 20 years when Apple dropped at least 10%, the stock gained around 10% on average in the following three-month period. Apple was positive in nine of the 14 quarters analyzed by CNBC Pro. In the median quarter following the losing one, shares jumped more than 14%. These quarters show a wide range of potential outcomes. After the stock lost more than 11% in the second quarter of 2025, shares came roaring back to life with a rally of more than 45%. On the other hand, the final quarter of 2008 brought a sell-off of nearly 25%, only adding to the dive of more than 32% seen during the preceding three-month period. — CNBC's Fred Imbert contributed to this report.