Apple stock price has plunged in the past few months, joining other American shares that have imploded. AAPL has crashed to $215, down by 17% from its highest level this year, and its lowest point since September 16 last year. This article explains why AAPL stock is at risk of further downside.
Apple’s business is facing challenges
Apple, the biggest company in the world, is staring at major risks that may affect its business and stock in the future.
The primary reason for this is that Apple lacks clear catalysts to propel its business higher in the future.
Apple still makes most of its revenue from the iPhone, which most people believe is a very good and unique product. The most recent results show that Apple made $69 billion from the iPhone, representing a 55% market share.
The challenge is that the iPhone is no longer growing since most people stay with their iPhones long before changing. Also, the smartphone industry has become highly competitive, with companies like Samsung and Xiaomi fighting for market share.
The recent numbers showed that iPhone sales stood at $69.1 billion last quarter, down from $69.7 billion in the same period a year earlier. Analysts believe that this trend may continue in the coming years.
Read more: AAPL stock: Apple gets another rating downgrade as analyst sees 13% downside
The other key parts of Apple’s business will likely start slowing. Its iPad made $8 billion last quarter, up from $7 billion in the same period a year earlier. The odds are that the iPad business will decelerate because the products largely look the same after each update. Customers are also spending more years with their iPad devices.
There are signs that the highly lucrative wearables, home, and accessories business is decelerating. Its revenue was $11.7 billion, down from $11.9 billion. The Mac segment may also slow over time.
Apple is banking its business on the services segment, which includes products like Apple Music, Apple Pay, Apple TV+, App Store, Arcade, News+, Fitness+, and Apple Books.
The main challenge within this segment is that its growth will keep slowing because of its weaker offerings compared to other companies. For example, Spotify is a more popular brand than Apple Music, while Apple TV+ has not lived to its hype.
Apple missed the AI shift
The other reason why the Apple stock price may be in trouble is that the company missed the AI shift. The most hyped Apple Intelligence has not lived to its hype as it is not able to answer basic questions.
Apple has partnered with other established AI companies like ChatGPT and Alibaba, but the integration has not been all that flawless.
This crisis is notable because Apple has not built its AI models even with its strong balance sheet. In contrast, Elon Musk has built Grok from scratch, and its product may now pass ChatGPT, the space pioneer.
Therefore, there are concerns about Apple’s valuation and whether it is justified. Apple has a market cap of over $3.2 trillion and a forward P/E ratio of 30. It has a forward revenue growth of 2.6%, which does not help to justify this valuation.
Apple stock price analysis
The weekly chart shows that the AAPL share price peaked at $260 this year, and has now plunged to $217. It has moved slightly below the 50-week Exponential Moving Average (EMA), a sign that bears have prevailed.
Apple shares have formed an ascending channel and are now midway towards the lower side of the channel. Therefore, the stock will likely continue falling in the coming weeks as investors target the next psychological point at $200.
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