Apple Tumbles, But Is It a Bargain or a Trap?

The renowned iPhone maker has been struggling to make headway this year, raising concerns among traders about whether its stock has reached its peak, but some ponder if this presents a buying opportunity.

Profit Taking or Buying Opportunity?

Apple shares have declined by over 13% so far this year, although they have slightly recovered since bottoming out a week ago. The bulk of these losses occurred after mid-February, well after its Q4 earnings, which coincided with a general market retreat led by tech due to growing concerns about economic growth in the US. While it would be easy to attribute AAPL's performance to general trends, there are some underlying challenges specific to the company, including the potential impact of escalating US tariffs on China, its second-largest market.

Among the investors who believe that the stock has peaked is Warren Buffett, who sold off two-thirds of Berkshire Hathaway's holding in Apple over the course of last year. The latest tranche of sales was disclosed at the start of Apple's sell-off. Although Berkshire still maintains a substantial holding in Apple – in fact, it remains the largest item in its portfolio – the significant trimming raises questions about the rationale behind this move, particularly as Buffett's investment company continues to accumulate a record amount of cash amid a market with historically high valuations.

What's Driving the Moves

According to Counterpoint Research, there is a global slowdown in the wearables market, such as the Apple Watch, and the company is facing currency headwinds due to a still-strong US dollar, which could potentially erase any gains in volume that the company might see in the upcoming quarter. There were hopes that the introduction of a new technology to the iPhone would boost sales, but Apple has struggled to implement the AI tech and recently announced a delay in the launch of a new version of its assistant, Siri. However, it's not all bleak.

Meanwhile, additional research suggests that the latest iPhone 16E sales have been outperforming previous models despite higher prices, which aligns with the sentiment that affluent customers are less affected during high-inflation and economic stress periods. Assuming the economic situation does not deteriorate further, this allows Apple to maintain its margins. Bullish analysts point to generally positive long-term trends for iPhone sales, its flagship product, and growing demand for cloud services. However, Apple might still face short-term hurdles around tariffs, a realignment in the economy, and catching up with AI, which could be resolved in the medium to long term.

Apple in Downward Channel

Apple's technicals show a channel-down pattern, suggesting a potential continuation towards the bottom and an eventual breakdown towards $150. But if supports at $200 and $175 hold firm, or the recent swing low, for that matter, a short-to-medium-term bounce to the upper channel trendline could ensue and complete the last upward leg of the formation. Apple could rise as high as $240, with a move above the channel invalidating the longer-term view.

Source: SpreadEx / APPLE

Key Takeaways

Apple faces short-term challenges, such as potential effects from tariffs, currency headwinds, and hurdles in implementing AI technologies. Still, its affluent customer base and positive long-term trends in its flagship products and cloud services provide optimism for a resurgence. Technical analysis signals a potential upside move, though it still suggests a potential breakdown towards $150 if the $200 support level fails to hold.