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Why Apple Stock Was Down Today

By John Ballard – Dec 16, 2021 at 1:46PM

Key Points

  • Apple is delaying its return to the office after three retail stores experienced a rise in new cases recently.
  • Apple has several near-term growth catalysts with iPhone, services, and the possibility of a new VR/AR headset coming next year.

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Investors seem to be getting a little nervous over the recent spike in COVID-19 cases.

What happened

Shares of Apple (AAPL 1.31%) were trading down 2.4% as of 12:21 p.m. ET on Thursday after the company pushed back its return to the office for employees, according to a report from the Wall Street Journal. The recent rise in COVID-19 cases can be to blame, which also forced Apple to close three retail stores due to a spike in new cases. 

The news comes as the stock currently sits close to new highs, with the share price up 31% year to date.

AAPL Chart

AAPL data by YCharts

So what

Investors are high on Apple's near-term prospects. The company is coming off a strong fiscal fourth-quarter earnings report, where iPhone revenue surged 47% year over year to nearly $39 billion. Investors are also enthusiastic about the services business, which grew 25% and should contribute to improving margins over the long term.

But with the stock's forward price-to-earnings ratio now at 31 based on next year's earnings estimates, up from about 20 this time a year ago, investors might be feeling nervous about anything that could dampen consumer demand for expensive iPhones. 

However, investors might recall that at the onset of the pandemic, Apple hit an all-time record in services revenue and a quarterly record for wearables (Apple Watch) during the fiscal second quarter of 2020. The company came back in the fiscal third quarter last year to post an 11% increase in revenue, despite a massive spike in unemployment. 

The exterior of Apple's store in Berlin, Germany.

Image source: Apple.

Now what

Looking ahead to next year, Apple is expected to launch a cheaper iPhone 5G model at a relatively low price point of $399 that could win over new converts from Android. 

Moreover, growth expectations are rising as investors weigh the likelihood that Apple may finally release its virtual reality/augmented reality headset next year, which would be Apple's first major product launch since releasing the Apple Watch in 2015 and would give Apple a promising product to tackle the metaverse opportunity

John Ballard has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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