Apple (NASDAQ:AAPL) has long been a market darling, delivering huge gains for investors over its history. Shares of the iPhone-maker have marched higher over the last decade, driven by growth in its trademark smartphone, a highly profitable services business, and, more recently, an expanding wearables segment.

However, like most consumer-facing companies, Apple is facing a number of challenges from the coronavirus pandemic. Its stores outside of Greater China have been shuttered for more than a month, consumers are stuck at home, unable to shop anywhere but online, and manufacturing in China was temporarily suspended due to the outbreak.

The biggest risk for Apple right now may not be the pandemic itself, but the global recession that is just starting to sink in. In the U.S., 26 million Americans have filed for unemployment in the last five weeks, while Europe has been hit even harder by the virus in terms of caseload than the U.S. has. 

Apple has actually outperfromed the S&P 500 since the coronavirus sell-off began, a sign investors believe the business will only be modestly impacted by the current headwinds as investors look forward to the anticipated rollout of 5G phones. However, that may be misguided. Though Apple is a tech company, it's a consumer-focused one and is therefore sensitive to discretionary spending.

Tables with Apple devices inside a vacant Apple store

Image source: Apple.

Bad news for consumer spending

Retail spending plunged 8.7% in March with much of the country shut down, and April is likely to be worse. Though Apple's online channel is still active, its own stores and the retail partners it relies on like Best Buy have mostly closed their stores. 

Apple is also a high-end, luxury brand, and though the company has succeeded in being both a mainstream and a premium brand, those types of brands are often the first to get hit in a recession. 

Apple's trademark iPhones go for more than $1,000 now, and refresh cycles were already getting longer before the downturn started. As more Americans and consumers around the world face unemployment and job insecurity, they are likely to simply hold on to their old phone, delay buying a new phone, consider buying a used or refurbished phone, or buy a cheaper phone, instead of the newest flagship iPhone. Some may even ditch the iPhone in favor of an Android, which tends to offer lower-priced options.

The iPhone was only in its infancy during the last recession, so there's no easy way to know how the marquee product will perform in tough times, but other expensive, durable goods may offer an analog. 

Cars, for example, have a number of simlarities with iPhones. For most Americans, they are necessities, but they are also big-ticket items, and in tough times, car sales tend to plunge. As you can see from the chart below, vehicle sales fell sharply during the last recession and took several years to regain their former levels.

US Total Vehicle Sales Chart

US Total Vehicle Sales data by YCharts

Similar sales of durable goods in general fell 12% in the last downturn.  

What it means for Apple

Looking at Apple's performance in the financial crisis, we see a similar impact. In fiscal 2009, sales of Macs, Apple's biggest product at the time, declined by 3%, following 38% growth the year before.  The next year, in fiscal 2010, they recovered strongly, growing 26%.  Apple's overall revenue growth at the time didn't decline as it was supported by emerging growth from the iPhone, but it still slowed down sharply. Revenue for the three years from fiscal 2008-2010, grew 52.5%, 14.4%, and 52%, respectively.

Both the Mac numbers and Apple's overall revenue show a significant deceleration during the last recession, spelling a warning for Apple and iPhone sales. Its marquee smartphone is already a mature product, and iPhone sales actually fell 14% last fiscal year to $142.4 billion due to lower unit sales.  iPhone sales bounced back in its fiscal first quarter, rising 7.6% due to a warm reception for the iPhone 11.  However, given the headwinds from the pandemic and the recession, sales should quickly decline from the first quarter and will likely finish the year worse than 2019's 14% drop. A similar deceleration trend is likely with Apple's other hardware, including iPads, Macs, and wearables, as well.

Despite the fact that Apple will be facing some strong headwinds in the quarters ahead, the stock is down less than 15% from its all-time high in February, and analysts are still calling for earnings and revenue growth, though that may be because they have yet to update their forecasts.

With most consumer stocks getting crushed during the crisis, Apple could come bearing some bad news when it reports second-quarter earnings on April 30. Though the company will recover over the long term, investors seem to be understimating the headwinds facing the tech giant over the next year or two.