Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Is Apple A Buy After The Stock's 20% Plunge?

By Investing.com (Haris Anwar/Investing.com)Stock MarketsNov 03, 2020 10:37AM ET
www.investing.com/analysis/is-apple-a-buy-after-the-stocks-20-plunge-200543292
Is Apple A Buy After The Stock's 20% Plunge?
By Investing.com (Haris Anwar/Investing.com)   |  Nov 03, 2020 10:37AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Apple's (NASDAQ:AAPL) stock is having a rough ride these days. Shares of the iconic iPhone maker are down about 20% from their peak, having closed yesterday at $108.77. The stock reached a 52-week closing high of $134.80 on Sept. 1, but is now underperforming shares of other mega cap tech companies.

AAPL Weekly TTM
AAPL Weekly TTM

This two-month bearish spell occurs after Apple became the first American company to surpass $2 trillion in market capitalization in August. Since then, it has lost $450 billion in value as investors dumped shares of the Cupertino, California-based technology giant. Apple is now worth $1.85 trillion, still the most valuable U.S. company.

Though the uncertainty related to the U.S. Presidential race and powerful coronavirus resurgence played their role in this slump, investors are also becoming more nervous about Apple's valuation after the stock's potent rally since the pandemic-induced slump in March.

The stock fell as much as 6.4% during intraday trade on Friday after the company reported earnings that disappointed some investors. It finished the week down more than 5.6%.

After a drop of this magnitude, the temptation to “buy on the dip” is difficult for some investors to resist, especially when this strategy has paid off repeatedly. Even after incorporating the latest sell-off, Apple stock has returned 260% during the past five years, including dividends.

That being said, there are clearly some short-term headwinds hurting Apple's stock and, in our view, there is more weakness to come before the shares bounce back. Here are the factors we believe are in play:

Weakening iPhone Sales

The company’s latest earnings report showed that Apple is struggling to sell more iPhones—crucial to meeting analysts’ current bullish forecasts. Sales of the company’s best-selling product fell 21% during the company’s fiscal fourth-quarter as the pandemic disrupted the global supply chain, delaying the release of newer models.

Apple generally introduces new iPhones models in September, giving its Q4 sales a considerable boost. This year, the 5G-enabled phones went on sale after Oct. 15, while the iPhone 12 mini and the iPhone 12 Pro Max are only becoming available for pre-order this week.

If Apple is able to revive iPhone growth in the current quarter, it will vindicate the bullish narrative of some analysts, who believe that competitive pricing on the new models, the first major redesign in three years and the attraction of faster speed could prompt users to upgrade their phones. As Bernstein analyst Toni Sacconaghi wrote in a recent note:

“The punchline is simple: iPhone revenues have to grow double digits YoY in FY Q1, or March needs to be dramatically stronger than seasonal for this cycle to have a shot of being the super cycle buyside investors appear to be anticipating,”

With iPhones sales remaining weak, investors are also becoming nervous as growth in greater China, one of the company’s most important regions, is faltering. Revenue from Asia fell 29% during the last quarter, the lowest since 2014.

Apple’s first 5G-enabled handset is a late entry in China, where local brands have long offered a suite of 5G-ready gadgets. “A crucial battle for Apple is in the premium smartphone market Apple once ruled before losing ground to Huawei Technologies Co. in recent years,” according to recent analysis in the Wall Street Journal.

Despite these challenges, Apple executives remain optimistic that the company is on track to achieve its targets. Luca Maestri, Apple’s chief financial officer told Bloomberg Television that he expects the iPhone 12 Pro Max with its larger screen to do “incredibly well” in the region and that the company is confident about growing there in the December quarter.

Bottom Line

There is little doubt that weakness in iPhone sales is the biggest factor negatively affecting Apple shares. Any potential rebound in sales is very much dependent upon the path the COVID-19 pandemic takes from here and how deeply it hurts the global economy.

That said, Apple continues to remain our favorite long-term pick due to resilience in the company’s other businesses due to its ongoing diversification strategy and its impressive innovation capabilities.

Is Apple A Buy After The Stock's 20% Plunge?
 

Related Articles

Tim Knight
Approaching $900 Billion By Tim Knight - Oct 22, 2021 2

Tesla (NASDAQ:TSLA) has defied all the critics and is at a new lifetime high today. The P/E is nearly 500, by the way. Here’s the lifetime history of this money-maker:

Is Apple A Buy After The Stock's 20% Plunge?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (15)
Jan Skilbrei
Jan Skilbrei Nov 05, 2020 3:46AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I thank you very much, its promising this site write when there is a pull back, too many times you guys wait until there is a peak somewhere, whether its commodities or stocks, (its very high risk/dangerous to buy or trade "there". Continue the good work, maybe even draw interest to a new upturn, cycle, since your work is to follow the markets. (Did you write early on in April on 'stay home' stocks?) the answer to yourself is important, as you got so many readers. anyhow, have a great day! ...
Mitch Krasner
Mitch Krasner Nov 03, 2020 4:04PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
apple is a money machine.buy it & this will b a legacy for yourself and heirs for years to come!
Dustin Berg
Dustin Berg Nov 03, 2020 2:21PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
apple is apple, don't trade it, buy it and stick it under your mattress and your wad will be probably double in 10 years, so not bad, better than cash for sure.
Duane Lee
Duane Lee Nov 03, 2020 1:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Is Apple a stonk?
Phil Kimmel
Phil Kimmel Nov 03, 2020 1:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Definitely a buy!
Justin Wolfe
Justin Wolfe Nov 03, 2020 1:18PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
iPhone sales are "weakening" due to COVID-related iPhone 12 launch delays. Nothing burger...
Kent Beason
Kent Beason Nov 03, 2020 1:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
that chart looks very strong
Wei jie Lai
Wei jie Lai Nov 03, 2020 1:14PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
it’s irrelavant to mentioned weaken iphone sales when it’s delayed this year compare to past year... write on some more insightful takes in stead of same thing what every other analyst had said lol
Billy Bilnaad
Billy Bilnaad Nov 03, 2020 1:14PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I think iPhone 12 sales will break records. The more expensive Pro is very popular and sold out everywhere
Titilayo Adekanmbi
Titilayo Adekanmbi Nov 03, 2020 6:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks Haris for the insightful write up.
Hannibal Lecter
Hannibal Lecter Nov 03, 2020 3:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thks Mr Anwar
Emanuel Dabah
Emanuel Dabah Nov 03, 2020 3:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Aapl will hit 90 way before 120  AMZN FB goog MSFT are way overpriced look to their PE and market value… where are they going to grow?
Stephane CHANDELIER
Stephane CHANDELIER Nov 03, 2020 3:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Well, as long as they have more buyers than sellers. Stock market prices are completely decorrelated from reality. It is more a price of "feeling" than of reality
Karen Gerry
Karen Gerry Nov 03, 2020 3:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I remember in 2018 the talking heads saying apple will never reach 1 trillion. They talked about the “law of large numbers”. Bingo!I wouldnt bet against them!
Vik Knowledge
Vik Knowledge Nov 03, 2020 3:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Vacuous article
Gamer Paper
Gamer Paper Nov 03, 2020 3:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Useless article and no answer to the headline
Jason Kevin
Jason Kevin Nov 03, 2020 3:11AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
So? Is it a buy?! No answer to the main question. 'our favorite long-term pick' is not an answer to the question 'Is Apple A Buy After The Stock's 20% Plunge?'
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email