Why Apple Stock May Drop Soon
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.
Specifically, we see these risks:
- Regulatory Stranglehold on App Store
- Deteriorating Working Capital Management
- iPhone Margin Squeeze from Chinese Competition
Risk 1: Regulatory Stranglehold on App Store
- Details: Forced reduction of 30% App Store commission, Valuation de-rate due to impaired Services growth
- Segment Affected: Services
- Potential Timeline: Immediate to Q1 2026
- Evidence: US antitrust class action trial date set for February 2026 (Feb 2026), India threatening fines up to $38 billion based on global revenue (Jan 2026), EU has already imposed a
500M fine for anti-competitive App Store policies (Dec 2025)
Risk 2: Deteriorating Working Capital Management
- Details: Negative impact on operating cash flow despite net income growth, Potential for significant write-downs of uncollectible receivables
- Segment Affected: All Segments (Corporate Level)
- Potential Timeline: Next 2 Quarters
- Evidence: Receivables turnover ratio has declined steadily to 10.46 in 2025 (Annual 2025); the average days to collect receivables increased to 35 days in 2025 (Annual 2025), Accounts receivable increased by 10.14% year-over-year in 2025 (Annual 2025)
Risk 3: iPhone Margin Squeeze from Chinese Competition
- Details: Decline in iPhone market share in Greater China, Gross margin compression from pricing pressure
- Segment Affected: iPhone (Greater China)
- Potential Timeline: Q1-Q2 2026
- Evidence: Weakening iPhone demand in China due to intensifying competition from local brands like Huawei (Sep 2025), High stock valuation is vulnerable to any signs of slowing growth in key markets (Sep 2025), Samsung notes rising cost pressures across the smartphone industry in 2026 (Jan 2026 Earnings Call)
What Is The Worst That Could Happen?
Looking at Apple’s risk during major market shocks tells an important story. It plunged 80% in the Dot-Com crash, 61% in the Financial Crisis, and about 31% in the recent inflation shock. Even smaller sell-offs like 2018 and the Covid slump saw dips close to 30%.
But the 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 Financials Yet?
- Revenue Growth: 10.1% LTM and 4.1% last 3-year average.
- Cash Generation: Nearly 28.3% free cash flow margin and 32.4% operating margin LTM.
- Valuation: Apple stock trades at a P/E multiple of 32.8
| AAPL | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Technology Hardware, Storage & Peripherals | – |
| PE Ratio | 32.8 | 24.9 |
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|
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| LTM* Revenue Growth | 10.1% | 6.4% |
| 3Y Average Annual Revenue Growth | 4.1% | 5.5% |
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| LTM* Operating Margin | 32.4% | 18.8% |
| 3Y Average Operating Margin | 31.6% | 18.3% |
| LTM* Free Cash Flow Margin | 28.3% | 14.0% |
*LTM: Last Twelve Months
If you want more details, read Buy or Sell AAPL Stock.
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