In the competitive world of tech giants, a recent slump in Apple’s stock due to concerns about iPhone sales has put Microsoft in a position to challenge its status as the world’s most valuable company.
Apple’s shares have dropped by 4% in 2024 amid worries about smartphone demand, following a remarkable 48% surge in the previous year.
On the other hand, Microsoft has experienced a modest 2% increase year-to-date, after an impressive 57% surge in 2023.
On Wednesday, Apple saw a 0.4% decline, while Microsoft gained 1.6%, narrowing the gap between the two companies.
Currently, Apple’s market value stands at $2.866 trillion, slightly ahead of Microsoft’s $2.837 trillion.
Apple reached its peak market capitalization of $3.081 trillion on December 14, while Microsoft touched $2.844 trillion on November 28.
The concerns about iPhone sales extend to China, where Jefferies analysts reported a 30% drop in sales during the first week of 2024.
This adds to the challenges Apple faces from strong competition posed by Huawei and other local rivals.
Apple’s highly anticipated Vision Pro mixed-reality headset is set to launch on February 2 in the United States, marking its most significant product release since the iPhone in 2007.
However, UBS analysts estimate that Vision Pro sales will have a minimal impact on Apple’s earnings per share in 2024.
Microsoft has briefly claimed the title of the most valuable company over Apple several times since 2018, with the most recent occurrence in 2021 during concerns about supply chain shortages due to the COVID-19 pandemic affecting Apple’s stock price.
Both companies are currently trading at relatively high price-to-earnings ratios compared to their historical averages.
Apple’s forward PE is 28, well above its 10-year average of 19, while Microsoft trades at around 31 times forward earnings, exceeding its 10-year average of 24.
Apple’s latest quarterly report in November revealed a sales forecast for the holiday quarter that fell short of Wall Street expectations, mainly due to weak demand for iPads and wearables.
Analysts predict a modest 0.7% revenue increase to $117.9 billion for the December quarter, marking its first year-on-year revenue growth in four quarters.
Apple is set to announce its results on February 1.
In contrast, analysts expect Microsoft to report a robust 16% increase in revenue to $61.1 billion, driven by the continued growth in its cloud business when it releases its quarterly report in the coming weeks.