Over the past two days, Apple (AAPL) has seen a significant drop in its stock value, marking its largest consecutive drop in a ten-month span. This drop has resulted in a loss of approximately $200 billion in market capitalization since the beginning of the week. Reports suggest that Chinese officials are advising government employees to refrain from using Apple devices, adding to the company’s challenges.
The situation:
This drop in value comes amid a turbulent September for the stock market and just before the much-anticipated iPhone 15 launch event. Enthusiasts can expect exciting features like an improved periscope zoom on the flagship Pro model, a new charging port (USB-C), and possibly even new color options.
Beyond devices:
However, the current setback for Apple is not linked to the quality of its products or the services it offers. Rather, it is about the performance of the company’s stock.
Historical context:
Just a month ago, Apple stock hit an all-time high, followed by a sharp decline at an unprecedented rate. Historical data suggests this weakness could persist for at least a month. Despite a notable recovery in the second half of August, the recent recession wiped out most of those gains, leaving the stock at levels not seen in months.
Analyst Perspectives:
With the long-awaited iPhone event on the horizon, analysts have expressed caution regarding Apple stock. Notably, this caution is not primarily due to recent news from Beijing regarding iPhone usage restrictions.
Market trends:
Looking at four decades of Apple’s history, data from Yahoo Finance indicates that the stock typically experiences a rally in July and August, followed by a decline in September. In fact, in 10 of the last 12 years, Apple stock has had negative returns in September, a pattern that has held even before the introduction of the iPhone.
Unusual behavior:
This year, however, has shown a different pattern. The anticipated rally in August failed to materialize, prompting JPMorgan’s Ron Adler to suggest that Apple stock is exhibiting an atypical defensive posture. Apple’s performance has lagged AI-related stocks and is also exhibiting countercyclical behavior, acting as a funding source for other stock purchases. While Apple has seen a respectable 35% rise in value this year, it pales in comparison to Nvidia’s (NVDA) 210% rise and Meta Platforms’ (META) 150% return.
Thinking about the future:
Apple is now dealing with three consecutive quarters of declining year-over-year revenue growth, leading to comparisons with tech giant IBM. Bernstein emphasizes two key takeaways from the IBM experience: the importance of revenue growth and the understanding that strong earnings growth alone may not sustain Apple’s stock valuation as a growth company.
Perspective:
If current trends continue into 2023, Adler suggests investors could exit Apple stock after the upcoming iPhone event and redirect their investments toward Meta, Microsoft (MSFT), and Nvidia (NVDA), the top three picks according to his team.