In a surprising turn of events, Apple finds itself grappling with a technical issue that has sent its stock value plummeting over 6% in the past two days, marking the steepest back-to-back slide in a decade. This decline has resulted in a staggering loss of approximately $200 billion in market capitalization since Monday. Reports suggest that Chinese authorities are advising government personnel to cease using the world’s most popular phone, further exacerbating the company’s woes.
This downward spiral occurs against the backdrop of an uncertain September for equities, just ahead of Apple’s highly anticipated iPhone 15 launch event scheduled for next Tuesday. Enthusiasts are eagerly awaiting potential enhancements, such as an improved periscope zoom feature in the flagship Pro model, a new USB-C charging port, and the possibility of new color offerings.
However, the current predicament facing Apple transcends the devices and services it provides; it lies squarely in the realm of its stock performance.
A mere month ago, Apple achieved a historic milestone in its four-decade history, reaching an all-time high in its stock value. This feat was swiftly followed by a significant sell-off, unprecedented in its swiftness and scale.
Analysts had predicted that this weakness would likely persist for at least a month, based on historical trends. Despite a commendable rally in the latter half of August, the recent downturn erased nearly all of those gains, leaving the stock hovering near multi-month lows.
As the major iPhone event looms, sentiment surrounding the stock has soured. Notably, JPMorgan’s Managing Director and sell-side tech trader, Ron Adler, pointed out in a recent client note that Apple stock typically experiences an uptick leading up to such events, only to subsequently face a downturn.
Data from Yahoo Finance, spanning back to Apple’s IPO over four decades ago, reveals a consistent pattern of a rise in July and August, followed by a decline in September. This trend was observed long before the introduction of the iPhone.
Recent history underscores this pattern, with Apple stock recording negative returns in September for 10 out of the last 12 years, consistently following the iPhone launches.
Although October historically bodes well for Apple, this year has begun differently. The anticipated surge in August failed to materialize, leading JPMorgan’s Adler to suggest that the stock’s behavior is currently atypical, showing defensive characteristics.
Apple’s performance this year, while respectable with a 35% increase, pales in comparison to Nvidia’s (NVDA) staggering 210% surge and Meta Platforms’ (META) impressive 150% return.
Zooming out, Apple is now contending with three consecutive quarters of declining year-over-year revenue growth, prompting comparisons to another tech stalwart, IBM (IBM).
Sanford Bernstein, in an analysis drawing parallels to IBM, emphasizes the importance of revenue growth for Apple, suggesting a need to focus on bolstering its top line. Additionally, strong profit growth alone may not suffice to maintain a high valuation for Apple stock as a growth company.
Adler at JPMorgan contends that if the trends observed in 2023 persist, investors might divest from Apple stock post-iPhone event next week, redirecting funds towards Meta, Microsoft (MSFT), and Nvidia (NVDA) — his team’s top three recommendations.
Source: Yahoo Finance
