The Risk Factors to Watch Out For in 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 stock has recently ascended to all-time highs, propelled by robust iPhone 17 demand and soaring Services revenue. However, beneath this impressive momentum, the premium valuation faces increasing scrutiny, as lingering questions about its comprehensive AI strategy amid aggressive rival advancements and persistent regulatory headwinds could easily turn current triumphs into future vulnerabilities.

What Could Send The Stock Crashing?

• Regulatory Hurdles: Global antitrust actions, like the EU’s €500M fine and US lawsuits, challenge Apple’s high-margin App Store model, with a February 2026 trial set and recent rulings against its 27% external transaction fee.
• AI Pace: Apple faces a widening AI gap as its comprehensive Siri overhaul is pushed to 2026, amid competitors’ faster feature rollouts. Apple Intelligence, focused on privacy and on-device processing, aims to mitigate this by 2026.
• China Dependency: Heavy reliance on Chinese manufacturing (90%+ of iPhones) exposes Apple to geopolitical risks and tariffs, potentially reducing profit margins by up to 9%. Diversification to India aims for 25% iPhone production by 2027.

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 38.2

*LTM: Last Twelve Months

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

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