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Apple Slumps. Time to Invest?

Boasting a market capitalization surpassing $2.6 trillion, Apple (Nasdaq: AAPL) has been a pivotal stock for many investors.

The California-based technology giant is off to a slow start so far in 2024. Apple is down this year, lagging behind other big tech rivals who are starting the year with strong gains.

In 2024, Apple’s stock faced setbacks such as disappointing financial earnings, the cancelation of its electric car product, and its lack of an artificial intelligence product.

Now, you might think this is the perfect time to swoop in and buy some Apple stock. After all, they've got a track record of bouncing back from any challenge. 

But Apple’s slow start to 2024 took a worse turn in early March.

Last week, Counterpoint Research published a report that said iPhone sales in China have fallen 24% in the past year. Ouch!

It seems like Apple is getting a taste of its own medicine as it faces fierce competition from the likes of Huawei and other aggressive pricing players. 

“Primarily, it faced stiff competition at the high end from a resurgent Huawei while getting squeezed in the middle on aggressive pricing from the likes of OPPO, vivo and Xiaomi,” said Senior Analyst Mengmeng Zhang.

Should you still invest in Apple? On one hand, they're Apple, the company that practically invented cool gadgets. They've got the brains and the resources to turn things around. On the other hand, China is their second-largest market, so a drop in iPhone sales in China is terrible.

Here is the bull case and the bear case.

The Bull Case

For starters, the recent price drop has transformed Apple into a value stock for those investors looking for a good deal. Apple's price-to-earnings ratio (a key indicator of stock value) is in the 20s, which means it's a steal right now.

Consumers are still largely obsessed with Apple products. Millions of people will be lining up to upgrade their phones, tablets, and whatever other magical gadgets Apple comes up with. 

Services revenue for Apple reached an all-time high in the last quarter.

The investment firm Wedbush predicts that Apple could sell 220 million to 230 million iPhones this year.

Now, let's talk about Apple's AI product. Sure, it hasn't hit the market yet, but that's just the calm before the storm. Rumor has it that the company's foundational AI model (a term that refers to generative AI) is expected to come out in June. Can you imagine the possibilities?

Lastly, let's not forget about Apple's history of overcoming challenges. They've faced their fair share of obstacles, from Steve Jobs' departure to the infamous "bendgate" scandal in 2018. But guess what? They always come out on top. 

The Bear Case

First off, let's talk about Apple's lack of AI products. While other tech giants are busy flaunting their fancy artificial intelligence gadgets, Apple seems to be nowhere. They haven't released any groundbreaking new AI products yet, including no generative AI products.

Does AI stand for “Apple’s Ignorance?”

People are also starting to doubt Apple's ability to innovate. Their newly-released Apple Vision Pro, for example, is being labeled as a gimmick, a flop, and let's not forget, expensive as heck with a jaw-dropping $3,499 price tag. 

Apple recently canceled its electric car project in February. They spent a boatload of money on a project that went nowhere.

Oh, and one last thing: Apple's services business is only growing because they raised prices. They're just squeezing more money out of their loyal customers. That's not how you win the hearts (and wallets) of investors.

With their lack of AI products, expensive flops, canceled projects, excessive spending, and price-hiking tactics, this company might be stumbling right now.

Comparing the Field

Apple’s stock price is $170.73 (-8.03% in 2024).

And Apple’s competitors:

Amazon’s stock price is $175.35 (+18.87% in 2024).

Microsoft’s stock price is $406.22 (+9.53% in 2024).

Alphabet’s stock price is $135.41 (-2.00% in 2024).

From the Expert Analysts

According to the 26 Wall Street analysts documented by TipRanks, Apple has a price target of $204.86, which is higher than the current price. Among those 26 Wall Street analysts, 16 listed the stock as a “buy,” 1 listed it as a “sell,” and 9 listed the stock as a “hold.” That means the majority of analysts favor the stock.

According to analysts on Benzinga, Apple’s stock is listed as “buy.” One analyst predicts that the price could jump to $250 and another analyst predicts that it could drop to $158.

Machine Learning Prediction

The blue line is Apple’s price in the past year and the red line represents a machine-learning prediction from Early Bird for the next three months. The machine learning model is from Google algorithms and was trained on public stock data that Early Bird collected.

This machine learning model predicts that Apple will reach $176 by June.

Early Bird’s Flight Plan

For long-term investors, Apple is still a solid pick. There are certainly short-term questions about the company that need to be addressed, including the previously mentioned lack of generative AI products, but Apple always finds a way.

If you’ve ever wanted to start accumulating Apple shares or if you wanted to add to your existing Apple shares, now might be a good time to buy.

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