The Hidden Dangers Facing Apple Stock

Apple (AAPL) has stumbled before. Its stock plunged more than 30% within a span of less than 2 months in 2018, wiping out billions in market value, and erasing massive gains in a single correction. If history is any guide, AAPL stock isn’t immune to sudden, sharp declines.

Apple’s shares have ascended nearly 20% over the past year, buoyed by robust iPhone 17 demand and a privacy-centric AI push, with Q4 revenue up 8%. Yet, this soaring valuation and intense competition, coupled with challenges in scaling its ambitious AI vision, create a delicate balance where any misstep could expose unforeseen vulnerabilities in its seemingly impenetrable ascent.

What Could Send The Stock Crashing?

• Regulatory Headwinds: EU fines of €500M in April 2025 and an October 2025 UK antitrust loss, potentially costing £1.5B, signal mounting pressure to alter App Store policies, impacting high-margin services.
• AI Competitive Lag: Despite $500B investment and Apple Intelligence, the company is perceived to lag rivals in generative AI, with a cautious approach and delayed features in the EU due to DMA rules.
• China Market Volatility: A Q1 2025 market share dip to 13.7% due to local rivals, offset by recent iPhone 17 gains to 25%, faces new risks from Huawei’s November 25th Mate 80 launch.

What’s The Worst That Could Happen?

When thinking about Apple’s risk, it helps to look at how deep its slides have been in major sell-offs. During the Dot-Com Bubble, it plunged over 80%, and the Global Financial Crisis saw a drop near 61%. The 2018 correction and Covid sell-off both dragged Apple down around 30-40%. Even the recent inflation shock knocked it about 31%. Solid companies like Apple still face sharp pullbacks when the market turns south.

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read AAPL Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

Is Risk Showing Up In The Company’s Financials Yet?

Let’s take a look at fundamentals

• Revenue Growth: 6.0% LTM and 1.8% last 3-year average.
• Cash Generation: Nearly 23.5% free cash flow margin and 31.9% operating margin LTM.
• Valuation: Apple stock trades at a P/E multiple of 40.1

*LTM: Last Twelve Months

If you want more details, read Buy or Sell AAPL Stock.

The Best Investors Think In Portfolios

Stocks can jump or crash but long term success comes from staying invested. The right portfolio helps you ride gains and cushion single stock drops

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.