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TOPSHOT – The Apple iPhone 15 series is displayed for sale at The Grove Apple retail store on release day in Los Angeles, California, on September 22, 2023. (Photo by Patrick T. Fallon / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images)

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Apple’s iPhone sales dropped sharply in China in the first quarter of this year as the company saw strong competition from domestic brand Huawei, according to a new report from market research firm Counterpoint Research.

Apple saw sales of its iPhones fall 19.1% in the first three months of the year, Counterpoint’s data showed, as Chinese telecommunications and consumer electronics giant Huawei saw a resurgence in its smartphone business.

The Shenzhen, China-based firm saw sales of its smartphones surge a whopping 69.7% in the first quarter, Counterpoint said.

This was thanks in no small part to the launch of Huawei’s Mate 60 smartphone, which comes with a high-end chip that supports next-generation 5G mobile connectivity.

Starting in 2019, the U.S. slapped sanctions on Huawei in an effort to stop it from accessing such technology, nearly wiping out Huawei’s smartphone business.

Now Huawei is staging a comeback. The company is the fourth-largest smartphone maker in China, according to Counterpoint’s Tuesday research note, piling the pressure on Apple, which ranks as third-biggest.

Apple shares were slightly lower in U.S. premarket trading Tuesday.

“Apple’s sales were subdued during the quarter as Huawei’s comeback has directly impacted Apple in the premium segment,” Ivan Lam, senior research analyst for Counterpoint Research, said in statement.

“Besides, the replacement demand for Apple has been slightly subdued compared to previous years.”

Lam hinted that the iPhone maker could still see a recovery in China with the possibility of new color options for its flagship devices, aggressive discounts, and new AI features expected to be presented at its upcoming Worldwide Developers Conference (WWDC) in June.

Apple CEO Tim Cook visits Vietnam — here's why

“That has the potential to move the needle significantly longer term,” he said.

China’s smartphone industry outlook

Overall, smartphone sales in China grew 1.5% year-on-year in the first three months of the year, marking the second quarter of positive growth for the industry.

Counterpoint said it anticipates low single-digit year-on-year growth for China’s smartphone market in 2024.

The firm suggested it expects AI features embedded into Chinese smartphone makers’ handsets to drive renewed demand for new mobile phones.

Chinese device makers Xiaomi and Oppo have both integrated Qualcomm’s Snapdragon 8 Gen 3 processor — which is designed for AI applications — in their latest flagship phones.

Huawei spinoff Honor, meanwhile, showed off an AI-powered eye-tracking feature in its latest flagship smartphone, the Magic 6 Pro, that allows a user to control a car using their eyes.

Chinese smartphone firms will likely start including new AI advancements in their mid-price phones in future, Counterpoint said.

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Apple’s falling iPhone sales don’t bother Wall Street so long as margins, buybacks are increasing

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May 3, 2024

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Apple's falling iPhone sales don't bother Wall Street so long as margins, buybacks are increasing

A 10% decline in iPhone sales sounds like a problem for Apple, considering the company counts on the devices for half its revenue.

But investors didn’t seem to mind Thursday, when Apple revealed the year-over-year drop in its fiscal second-quarter earnings report. The stock rose more than 6% after the market close, a rally that would be the steepest since November 2022 should it continue into regular trading Friday.

Instead of glaring too much at iPhone revenue, Wall Street chose to focus on the positive. Apple’s gross margin expanded to 46.6%, continuing an upward trajectory that reflects the company’s growing services business, which brings with it stout profits.

Apple also signaled overall revenue growth in the current quarter will be in the low single digits, after a 4% decline in the second period. Analysts were looking for third-quarter growth of 1.3%, according to LSEG.

Deepwater Asset Management’s Gene Munster described the guidance as a “relief” given the recent trajectory of the business.

“I was expecting this was going to be flat, some investors were saying it was going to be down a few percent in June,” Munster told CNBC’s “Fast Money” after the report. “I think that was a big part of this move higher.”

But perhaps the biggest catalyst for the pop was Apple’s announcement that it had approved $110 billion of share buybacks, the most ever for a public company. For the past three years, Apple has authorized $90 billion in annual repurchases.

The after-hours jump shows how much investors are valuing Apple’s massive cash flow and the company’s willingness to return more of it to shareholders. It’s a shift in the way Apple has been viewed by Wall Street over the years, away from a hits-driven gadgets business and toward a financial powerhouse.

“Our free cash flow generation has been very strong over the years, particularly the last few years,” Apple CFO Luca Maestri said on an earnings call.

Apple revealed earlier this year that it has 2.2 billion active devices, illustrating the mammoth reach of its customer base as the company rolls out new subscription services. Despite the 4% drop in revenue, Apple still recorded nearly $24 billion in profit, a slip of just over 2% from a year earlier.

Apple said iPhone sales suffered from a difficult comparison to last year, when sales were elevated after previous shortages. Still, investors are looking for future iPhone growth, and many analysts say a potential iPhone with artificial intelligence features could do the trick and help the company snag customers from Android. Annual iPhone revenue peaked in Apple’s fiscal 2022.

While Apple provided some guidance for total revenue, it avoided offering any sort of forecast for iPhone sales.

That’s a change, even for a company that’s been giving less forward guidance since the pandemic. Maestri typically provides trends on iPhone sales, and had for the past four quarters.

There’s no guarantee investors will be able to continue counting on increased buybacks from a company that’s been more aggressive in that department than any other. Apple says it’s trying to draw down its huge cash pile, which stood at $162 billion at the end of the quarter. When its debt is roughly equal to its cash balance — meaning the company is net cash neutral — Apple will evaluate what to do next, executives said Thursday.

As of the end of 2023, Apple had spent $658 billion on buybacks over the past 10 years, far ahead of second-place Microsoft, according to S&P Dow Jones Indices.

“For the last couple of years we were doing $90 billion and now we’re doing $110 billion,” Maestri said on the call.

In terms of what happens when Apple gets to net cash neutral, Maestri said, “let’s get there first. It’s going to take a while still.”

“And then when we are there,” he said, “we’re going to reassess and see what is the optimum capital structure for the company at that point in time.”

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Don’t rate Tesla’s Full Self Driving too highly, tech investor says: ‘By no means autonomous driving’

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May 3, 2024

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Don't rate Tesla's Full Self Driving too highly, tech investor says: 'By no means autonomous driving'

People are shopping at a Tesla store in Shanghai, China, on Feb. 17, 2024.

Costfoto | Nurphoto | Getty Images

News of electric car giant Tesla’s progress toward rolling out its advanced driver-assistance feature in China isn’t as groundbreaking as investors are treating it, according to a top tech investor.

Mark Hawtin, GAM Investment Management’s investment director focused on investing in disruptive growth and technology stocks, told CNBC’ “Squawk Box Europe” Thursday that such expectations were misleading — not least because Tesla’s Full Self Driving service doesn’t offer full autonomous driving.

“We should say what they’re doing — everyone’s talking about this full self-driving capability,” Hawtin told CNBC. “What they’re going to be able to do in China is what they already do in the U.S. or U.K., which is sort of this assisted-driver capability.”

On Monday, shares of Tesla rose sharply, notching their best day since March 2021, after it passed a significant milestone toward the launch of FSD in China. Local Chinese authorities removed restrictions on its cars after passing the country’s data security requirements, Tesla said Sunday.

This raised expectations that Tesla’s FSD would soon be available in China. Tesla shares are up 6.7% in the last five trading days, largely on the back of buzz surrounding its roadmap to bringing FSD to China — plus, comments from CEO Elon Musk about plans to start production of more affordable models in early 2025.

But Hawtin said that the company’s so-called Full Self Driving service lacks the qualities that would make it an example of truly self-driving technology.

“It’s by no means autonomous driving yet,” he told CNBC. He thinks that a version of Tesla FSD capable of “true autonomy” is still five to 10 years away.

Hawtin said that Tesla’s reported deal with China’s Baidu is a bigger short-term win for Baidu than Tesla, adding that competition is intense in China with names like BYD, Huawei, Xpeng, Li Auto, and Xiaomi all supplying technology capable of Level 2 autonomy.

Tesla reportedly scored a deal with Baidu that would allow Musk’s firm to tap into Baidu’s mapping service license, a key requirement for offering FSD on Chinese public roads, per Reuters.

Tesla was not immediately available for comment when contacted by CNBC.

Full Self Driving, or FSD, is an upgrade to Tesla’s Autopilot driver assistant. Tesla doesn’t yet make or sell cars capable of full autonomous driving. It sells “Level 2” driver-assistance systems, marketed under the brand name FSD.

“Level 3” assisted driving, otherwise known as “conditional automation,” entails systems that handle all aspects of driving, but a driver still must be present, according to the SAE standards-setting organization.

Tesla has offered its FSD technology in China for years, but with a restricted feature set that limits it to operations like automated lane changing.

GAM does not own shares of Tesla, and Hawtin said he doesn’t personally own shares either.

– CNBC’s Lora Kolodny and Evelyn Cheng contributed to this report

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Apple on pace for best day since 2022 after earnings beat, $110 billion stock buyback

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May 3, 2024

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Apple on pace for best day since 2022 after earnings beat, 0 billion stock buyback

Apple’s Chief Executive Officer Tim Cook attends the China Development Forum in Beijing on March 24, 2024. 

Pedro Pardo | AFP  | Getty Images

Apple shares popped more than 6% on Friday morning after the company reported better-than-expected second-quarter earnings and the largest-ever stock buyback program. If the gains hold until the market closes, it will be the best day for Apple shares since Nov. 30, 2022.

The iPhone maker announced on Thursday it would repurchase $110 billion of its shares, the biggest buyback in U.S. history, surpassing Apple’s prior repurchases. The company posted earnings of $1.53 per share on revenue of $90.75 billion, exceeding analysts’ estimates of earnings of $1.50 per share on revenue of $90.01 billion, according to LSEG.

But overall sales decreased 4% and iPhone sales dropped 10% year over year during the quarter, indicating flagging demand for the smartphone’s latest generation. Apple CEO Tim Cook told CNBC that quarterly sales suffered from a difficult comparison to the year-earlier period.

Analysts at Bank of America reiterated their buy rating of Apple stock — calling it a top pick — and raised their price target to $230 from $225 in a Friday investor note, writing that they expect the company to roll out generative artificial intelligence features for the iPhone this year.

“Apple is growing iPhones in Mainland China, estimate revisions are turning positive and GenAI features will drive a strong upgrade cycle,” they wrote.

JPMorgan analysts, maintaining an overweight rating, lifted their price target for Apple to $225 from $210 on Thursday, pointing to “resilient” year-over-year iPhone revenues and “expectations of an upgrade cycle-led tailwind in iPads” ahead of Apple’s product launch event next week.

“All in all, while modest revenue growth year-over-year might not be the ideal outcome,” they wrote, “it now provides visibility into higher revenue opportunities in the coming years with tailwinds from product cycles across hardware devices as well as an AI-led smartphone cycle further boosting growth.”

Morgan Stanley analysts retained their overweight rating of Apple and hiked their price target to $216 from $210 on Friday, citing the company’s quarterly performance, year-over-year growth in iPhone shipments to China in March, stock buyback and hints at AI updates to come.

“It’s hard not to get more bullish here,” they wrote.

CNBC’s Michael Bloom contributed to this report.

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