Apple Stock: 2 Reasons Why It’s Down, 2 Reasons To Believe In A Rebound

About 54% of Apple’s revenues come from its core iPhone segment. While the product serves as an impressive case of strong demand and customer loyalty in the tech world, it also presents a problem of over-dependence by the Cupertino company on a single line of business.
The segment has been hurt lately by reduced demand in China, specifically. The country is a major market for Apple, where Huawei has now been gaining ground and stealing market share away from its peers.
The second headwind that Apple is facing is AI. This is a case of a technology from which Apple should benefit, just like most Big Tech companies might. However, the company is being penalized instead for seemingly not being one of the main players in the initial stages of the AI revolution

To go with the two issues presented above, I think there are two key reasons why Apple stock might recover from its early 2024 slump – maybe sooner than many expect.

For starters, the company’s business fundamentals remain strong. While some may fear reduced hardware demand amid an environment of unimpressive global economic growth and consumer spending, the Cupertino company is far from being a struggler.
In the most recent quarter – the big holiday period, in fact – iPhone sales grew by the most since fiscal Q4 of 2022. Mac posted positive growth for the first time since that same quarter.
Better yet, the valuable services segment seems to have regained its footing, growing segment revenues by double digits (16% and 11%) for two consecutive quarters. This had not happened since fiscal Q3 of 2022.
Then, there is the question of valuation. For a while, AAPL skeptics argued that the stock had reached unsustainable P/E levels. In the past three years, the forward earnings multiple reached highs of 31.9x in 2022 and 31.4x as recently as July 2023

Now, AAPL’s P/E is a more manageable 25.9x, which suggests a PEG of 2.8x considering the 2025 consensus EPS growth rate of 9.1%. While this growth-adjusted multiple is still fairly elevated, it has returned to mid-2020 levels.
At least historically, Apple stock has consistently recovered from declines in valuation similar to the one observed earlier this year. While a rebound may not happen in the very near term necessarily, patient investors could eventually benefit given enough time.