Why is Apple Inc. stock underperforming the market?

Apple Inc. (AAPL) has experienced a mixed market performance, driven by product cycles, competitive pressures, and strategic shifts. Analysts are optimistic about Apple's earnings, projecting Q1 earnings per share at $2.35, up from $2.18 the previous year, with revenue expected to rise to $124.13 billion from $119.58 billion year-over-year. The Services segment continues to show robust growth, contributing to higher gross margins, which could offset challenges in other areas. Despite a decline in iPhone sales, particularly in China due to competition from local manufacturers like Huawei and Xiaomi, Apple has maintained strong gross margins and services growth, which analysts find encouraging. The iPhone 16 models, despite integrating AI features, have struggled to gain traction in China, leading to stagnant sales. Strategically, Apple is working to mitigate the impact of U.S. tariffs on China imports by potentially shifting production to countries like India, which could reduce tariff impacts on earnings. The company's investment in its News app and focus on scaling its advertising effectiveness are seen as potential growth drivers. Analysts express optimism about Apple's future due to anticipated AI-driven iPhone upgrade cycles, expected to last through 2025. Analyst ratings on Apple's stock vary, with price targets ranging from $184 to $325, reflecting differing views on the potential for a multi-year AI-driven growth cycle versus concerns over iPhone sales and geopolitical tensions. Overall, Apple's market performance reflects a balance of growth in services and challenges in hardware sales, with strategic initiatives and product innovation being key factors under close analyst scrutiny.