Apple's Stock Struggles After a Dismal December

Investors are now paying attention to the potential risks associated with Apple Inc., which has caused the company's market value to drop below $2 trillion and could lead to further losses in the future.

Despite the fact that the past year was the worst for the stock since 2008, the stock of the world's most valuable company had been able to resist the negative effects that had impacted other tech giants in 2022. However, recent production delays of iPhones and worries that demand is decreasing due to a slowing economy have caused the stock to appear more average. With its valuation still higher than its average over the past decade, there is still potential for it to drop.

According to Matt Maley, chief market strategist at Miller Tabak + Co., Apple is often viewed as a safe investment. He noted that when investors become discouraged, they tend to sell Apple stock. He added that when the market reaches a low point, Apple shares become relatively inexpensive, although they are still slightly pricey.

The current price of Apple shares is approximately 20 times the profits that are anticipated in the next year. This is a decrease from the highs of 30 times, but it is still higher than the 10-year average of 17 times, as reported by Bloomberg.

The change in the stock market has been sudden. Just last November, Apple was doing better than the S&P 500, which was an impressive accomplishment considering other tech companies such as Amazon.com Inc. and Alphabet Inc. had dropped by more than a third of their worth in 2022. Apple's success was due to its generous capital returns to shareholders through buybacks and dividends, as well as the idea that its devoted customer base would protect the company in the event of an economic downturn.

Confidence in the argument is waning, as well as investor confidence that the Federal Reserve will soon provide assistance with higher interest rates. Apple stocks dropped 12% in December, which was more than the S&P 500's 5.9% decrease and the Nasdaq 100's 9.1% decrease. This was Apple's most significant monthly decrease since May 2019.

On Tuesday, the stock market continued to show signs of weakness after Nikkei reported that Apple had instructed some of its suppliers to reduce the amount of components they were producing for a variety of products due to a decrease in demand. Exane BNP Paribas also downgraded the stock, noting that Apple's growth prospects did not seem to justify its higher valuation compared to other similar companies.

Due to disruptions in production in China caused by the Covid-19 pandemic, Wall Street analysts have been reducing their estimates for iPhone sales in Apple's first fiscal quarter, which concluded on December 31st. JPMorgan Chase & Co. has revised their projection twice since November, with analyst Samik Chatterjee now expecting around 70 million units to be sold, down from the previous estimate of 82 million.

Despite the losses in sales, it is likely that these have been delayed to the second quarter as supply issues are resolved. Foxconn Technology Group has reportedly brought the world's largest iPhone plant to nearly 90% of its peak capacity, according to the Henan Daily. Analysts have also stopped reducing their revenue and earnings estimates.

Analysts have yet to adjust to the stock's decrease. The average target price for the upcoming year has gone down to around $173 from $191 in March. The stock ended Tuesday at $125.07.

Tesla Inc. saw a 12% drop in their shares on Tuesday after they reported delivering fewer vehicles than anticipated in the last quarter. This news has only added to the already declining value of the electric-car maker's shares, which have decreased by three-fourths since reaching their peak in November 2021. The company's market value is now at $341 billion, making it close to being lower than Meta Platforms Inc.'s $327 billion. The parent company of Facebook has not been larger than Tesla since December 2021.