Investors in Apple (AAPL -0.35%) are not having a good 2024. The stock is down over 10% year to date, while the S&P 500 and Nasdaq Composite are up over 9%.
It's difficult for such a heavily weighted stock to underperform the broader benchmarks by that much in a short time. But Apple is dealing with several very real challenges and has largely missed out on the tech rally that is being fueled by artificial intelligence (AI).
As of March 22, Apple is now just 10.5% away from its 52-week low during a time when many other tech stocks are setting new all-time highs. Here's why Apple is about to get even closer to its 52-week low even if the stock stays where it is, and whether you should buy it now.
Image source: Getty Images.
Apple stock is lapping lows
Apple's current 52-week low of $155.98 was reached on March 28, 2023. As the calendar rolls on, Apple's new 52-week low will get higher even if the stock price doesn't move. After May 4 (and assuming Apple doesn't go below this point), the new 52-week low will be $165.67 from Oct. 26, which is less than 5% below where Apple currently trades. By comparison, the stock's 52-week high of $199.62 occurred more recently, on Dec. 14, and it nearly exceeded that high just a couple of months ago in late January.
A stock's 52-week lows and highs are merely ranges, but they do signal if investors are optimistic or pessimistic. Apple is already closer to its recent low than its high, but it will get much closer to the low with time.
On a favorable note, it's worth mentioning how steady Apple has been. There is only a 20% swing from its 52-week high and the late-October low, meaning it has not been a volatile stock. Its 4.1% sell-off on March 21 was the largest single-session drop since Aug. 4. You would be hard-pressed to find a big tech stock that hasn't fallen more than 5% in a session in over a year.
Apple is in a bit of a funk
As consistent as Apple has been, there are concerns that the investment thesis is weakening, setting the stage for further selling pressure. The company has a high success rate when it comes to hardware and accessories. But its current product pipeline is the most uncertain it has been in over a decade.
The company launched the iPad in January 2010. The Apple Watch, announced in September 2014, was initially met with skepticism but turned into a major hit. AirPods came out two years later in September 2016.
Aside from new versions of existing products, there hadn't been a significant new product until the Vision Pro was unveiled in June 2023 and made available in the U.S. on Feb. 2.
The company isn't in a new product and accessory drought, but the Vision Pro is unproven, and Apple simply hasn't come out with much else for a while now. Some of the uncertainty comes from within its existing ecosystem -- namely the iPhone.
New iPhone models feature improvements, but there hasn't been a massive leap for several years. Some hoped that the iPhone 15 Pro and Pro Max would be a turning point, but that hasn't been the case thus far, as iPhone sales growth has ground to a halt.
Whether it's a lack of innovation or the fact that the upgrade cycle is getting longer, the product and accessory portfolio looks particularly vulnerable right now. That all could change in a heartbeat if the Vison Pro becomes a resounding success, Apple launches an AI-enabled iPhone that is welcomed by users, or a lot of folks who bought new products during the height of the pandemic decide to upgrade.
In sum, it's still too early to sound the alarm on Apple's innovation glut, but there are cracks that are beginning to form.
The growth is gone (for now)
Trailing diluted earnings per share (EPS) are up just 4.2% over the last two years. And judging by analyst estimates, the growth isn't going to return in the short term.
Its price-to-earnings (P/E) ratio is 26.8, and its forward P/E is 26.3. Apple reported its 2024 first-quarter earnings for the period ended Dec. 30, 2023. Average analyst EPS estimates for the full fiscal year are $6.56.
Growth is expected to tick up in fiscal 2025, with average earnings estimates of $7.16 per share, 9% higher than fiscal 2024. But those results won't fully materialize until Apple reports its 2025 full-fiscal-year results in February 2026 -- a long time to wait.
Single-digit EPS growth is a negative outlook for Apple, especially because a few percentage points are due to buybacks. So, taking that out, forecasts are really only calling for net income growth in the mid-single digits in fiscal 2025, which would imply little improvement in product sales and next to no growth from the Vision Pro.
And these forecasts don't even factor in the risks from the recently announced lawsuit against Apple by the Department of Justice. The suit targets the company's services more than its products and could compress margins for what has been a bright spot in an otherwise cloudy period.
An attractive setup
When an excellent industry leader with an impeccable brand faces negative sentiment, a gloomy outlook, and other challenges, it is usually a good buying opportunity even if the stock goes down more in the short term. There are countless examples of this dynamic playing out across multiple industries.
Big tech stocks got clobbered in 2022 and staged an epic recovery in 2023. This year, the best-performing stock in the Dow Jones Industrial Average isn't Salesforce or Amazon or Microsoft -- it's Walt Disney, which had underperformed the market for multiple years but is up 28% in less than three months.
With challenges compounding, I expect Apple to break to a new 52-week low, especially once the margin narrows between its current price and the new higher one-year low after March 28. But the more Apple falls, the better value it will become for long-term investors.
The stock is worth buying now, but investors should closely monitor the performance of the Vision Pro and watch for updates at its Worldwide Developers Conference (usually early June) and its annual Apple Event (usually early to mid-September).
