Apple Confronts Technical Hurdles Amidst Stock Downturn

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Apple’s Stock Slide: Apple (AAPL) has experienced a significant drop in its stock price, plummeting over 6% in the past two days. This decline marks the largest consecutive slide in the stock’s value in the past 10 months. The company has lost approximately $200 billion in market capitalization since Monday. The drop in Apple’s stock price coincides with reports of Chinese officials urging government employees to stop using iPhones.

Technical Challenge: The current challenge for Apple lies in its stock chart, rather than its products or services. Just a month ago, Apple’s stock reached an all-time high, followed by a rapid and unprecedented sell-off. Historical data suggests that this weakness in the stock may persist for at least a month. Although the stock saw a strong rally in the latter half of August, the recent decline has erased most of those gains, leaving it near multi-month lows.

Upcoming iPhone Event: Apple’s iPhone 15 launch event is scheduled for the following Tuesday. This event typically leads to a rise in Apple’s stock price in the lead-up but is often followed by a sell-off afterward.

Historical Stock Behavior: Historical data shows that Apple’s stock tends to rise in July and August but then declines in September, a trend that predates the iPhone’s launch. In 10 of the last 12 years, Apple’s stock has delivered negative returns in September, consistently declining after the iPhone launch.

Uncharacteristic Behavior: Analysts have turned less optimistic about Apple’s stock, noting its uncharacteristic defensive behavior. When AI stocks rallied this year, Apple lagged behind. It has also served as a cash source for buyers of other stocks, despite its respectable 35% increase in stock price this year, which pales in comparison to companies like Nvidia and Meta Platforms.

Declining Revenue Growth: Apple is currently facing three consecutive quarters of declining year-over-year revenue growth. This situation has led some analysts to draw comparisons between Apple and IBM, another tech stalwart that experienced significant stock price challenges after a period of growth.

Takeaways: According to Sanford Bernstein, two key takeaways from IBM’s experience apply to Apple. First, revenue growth is crucial, and Apple needs to focus on its top line. Second, strong profit growth alone may not justify a high stock multiple, and Apple may need to adapt to a different valuation approach.

Investor Predictions: JPMorgan’s Ron Adler suggests that if the trends observed in 2023 continue, investors may choose to sell Apple stock after the iPhone event and invest in Meta, Microsoft, and Nvidia, which are currently his top three picks.

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