Is it advisable to purchase Apple stock at a reduced price in 2022?
In the world of technology, Apple has been grappling with a series of headwinds that have contributed to a decline in its stock price. The company's shares have entered a bear market, dropping 25% since peaking at around $260 near the end of 2024.
The primary reasons for the decline can be attributed to rising costs from tariffs and supply chain shifts, competitive and regulatory pressures, and lagging AI innovation.
Geopolitical tensions have forced Apple to shift production from China to countries like India and Vietnam, adding approximately $900 million in costs for Q3 2025. Potential 25% tariffs on non-U.S.-made products could push iPhone prices up to $3,500, which risks lowering demand in price-sensitive markets. Ongoing delays in component deliveries and logistical challenges have also hindered Apple’s ability to meet consumer demand, impacting sales and investor confidence.
Apple faces increasing competition in smartphones and wearables from companies innovating and offering competitive alternatives, contributing to market share concerns. The company's efforts to expand into wearables like the Apple Watch and AirPods have not been enough to move the needle for its $400 billion in consolidated annual revenue.
Market analysts criticize Apple for not keeping pace in artificial intelligence initiatives compared to peers, raising concerns over its long-term growth prospects. Some investors and analysts call for a leadership shakeup focused on product innovation rather than logistics.
Increased investigations into antitrust and data privacy matters place additional risks on Apple’s operations and profitability. A recent antitrust court case regarding the large payment Alphabet's Google Search makes to be the default engine on Apple devices has been a point of contention, with estimates that the payment is more than $20 billion a year in pure profit.
Despite these challenges, opinions are mixed regarding whether it is a good time to buy the dip. Some analysts emphasize Apple’s strong brand loyalty and resilient ecosystem, viewing current price levels as a potential long-term value opportunity despite short-term headwinds. Others remain cautious due to uncertainty in AI strategy, regulatory risks, and price elasticity concerns at higher product prices.
Market sentiment shows cautious optimism ahead of Apple’s Q3 2025 earnings report, with anticipation that strong performance in high-margin services could drive a positive turnaround. The services segment, which includes App Store revenue, licensing deals, and revenue from first-party apps like Apple Music, has grown from $13 billion in 2012 to $102 billion over the last 12 months. Services revenue comes with high profit margins, with gross profit over the past 12 months closing in on the gross profit from hardware products.
However, Apple's net income has not grown since 2022, making it one of the slowest-growing stocks with a high P/E ratio on the market today. Stocks with P/E ratios above 30 are typically reserved for companies with earnings growing at a quick pace, with strong future growth prospects. Apple's stock price, currently at about 30.5, is higher than some of its technology peers that are growing much faster.
Investors are also concerned about tariffs, slowing revenue growth, and antitrust lawsuits that may impact Apple’s future earnings. The iPhone, despite generating over $100 billion in revenue in the last six months, has seen stagnated sales for several years. Apple remains a hardware provider heavily reliant on iPhone sales, a product category that has matured.
The iPhone's dominance has been further challenged by the launch of the Vision Pro virtual reality headset, which has been a flop, with estimates suggesting unit sales are less than 1 million. This launch, Apple's largest hardware launch since the iPhone, has not been able to revitalise the company's hardware offerings.
Despite these challenges, the App Store revenue is projected to be at least $10 billion a year in high-margin revenue for Apple. Whether buying now is wise depends on your investment horizon and risk tolerance: the current valuation may offer a long-term opportunity if Apple can navigate these challenges successfully, but near-term risks remain significant.
- Some investors and analysts suggest that Apple's strong brand loyalty and resilient ecosystem, as demonstrated by the growth of its services segment, may offer a long-term value opportunity despite current headwinds in finance, like tariffs, supply chain challenges, and lagging AI innovation.
- Market analysts criticize Apple for not keeping pace in artificial intelligence initiatives compared to its peers, raising concerns about its long-term growth prospects and finance in the stock-market, particularly due to potential regulatory risks and worries about its AI strategy.
- Despite theApple's net income stagnation since 2022 and slowing revenue growth, many believe the app store revenue, estimated to be at least $10 billion a year, could provide high-margin revenue for the company; yet, whether purchasing Apple stocks now is wise depends on one's investment horizon and risk tolerance, considering the significant near-term risks associated with tariffs, antitrust lawsuits, and a mature iPhone market.
