Apple drifts lower on EU tax ruling despite iPhone 16 launch

• Apple traded 1% lower on Tuesday after announcing EU tax case conclusion.
• EU says that Apple must repay Ireland for unfair tax treatment prior to 2016.
• Apple released new AI-themed iPhone 16 on Monday.
• Apple says it will pay $10 billion in tax charges for current quarter.

Apple (AAPL) gave back some ground on Tuesday despite what many analysts called a positive unveiling of its new iPhone 16 lineup on Monday. The Cupertino, California-based company said on Tuesday that it had lost a significant tax case with the European Union (EU) and would have to pay up to $10 billion in tax charges this quarter.

Apple stock slipped 1% by lunchtime. The Dow Jones Industrial Average (DJIA), of which it is the 12th largest constituent, also sailed 0.9% lower, worse than its S&P 500 or NASDAQ counterparts.

Apple stock news: EU tax lawsuit

The EU has finally won its case against Apple that it first launched back in 2016. The suit alleged that Apple received state aid from Ireland based on tax opinions given in 1991 and 2007. 

Both Apple and Ireland fought the ruling in 2016, but an EU court has once again decided against the plaintiffs.

"We are disappointed with today’s decision, as previously the General Court reviewed the facts and categorically annulled this case," Apple said in a statement.

Apple says it “expects to record a one-time income tax charge in its fourth fiscal quarter ending September 28, 2024, of up to approximately $10 billion, which will increase the Company’s effective tax rate for the quarter.”

Of course, this was more of an issue in 2016 when Apple was a smaller company. As a $3.3-trillion-market-cap monstrosity, what’s $10 billion between friends?

The current quarter is the fiscal fourth quarter, which ends on September 28, and the tax charge will be leveled against that quarter's earnings.

Apple stock news: iPhone 16

CEO Tim Cook showed off the new iPhone 16 on Monday. Analysts were generally pleased but seemed to think that there were few upside surprises.

"Apple’s new hardware product announcements were largely in line with expectations, and more evolutionary than revolutionary," wrote Bernstein analyst Toni Sacconaghi in his summary.

The focal point of the iPhone 16 is the company’s in-house A18 chip, which is specifically designed for AI workloads. The A18 boasts a 6-core CPU that is 30% faster than the iPhone 15 chip. Additionally, the A18’s 5-core GPU boasts a 40% increase in speed compared to the iPhone 15 version.

Apple's A18 chip CPU features two high-performance cores and four high-efficiency cores (Apple)

The iPhone 16 is heavily influenced by new artificial intelligence (AI) technology, but Sacconaghi found the AI demonstration "underwhelming."

Several other analysts are predicting that uptake rates may be lower than expected as many consumers wait for the iPhone 17 launch to upgrade. That said, many of the analysts still see upside in the stock price, giving AAPL shares a price target between $225 and $275.

Apple stock forecast

Apple stock is now trading beneath its 50-day Simple Moving Average (SMA). The Moving Average Convergence Divergence (MACD) indicator also shows a bearish crossover, so the short-term may be dim for bulls.

But technical support comes in ample supply. Two past local highs at $199.62 and $196.00, the latter of which was also used as support, seem like obvious entry points. Additionally, the 100-day SMA near $207.00 and the 200-day SMA near $195.00 look like ripe points of interest.

The August 29 range high was a lower higher compared to the July 15 range high, which is a bearish sign. However, Apple stock often sees several lower highs before launching a new round of rallying.

AAPL daily stock chart