So far, Magnificent Seven member Apple (NASDAQ:AAPL) is having a not-so-magnificent year. However, every company, even if it’s as big and famous as Apple, is bound to encounter problems sometimes. AAPL stock deserves a “B” grade as value seekers ought to consider buying a few shares if they’ve been waiting for a dip.
Apple’s problems aren’t so bad that the company can’t deal with them. Apple stock has a history of recovering from drawdowns, so there’s no need to panic. With that in mind, let’s look at the issues and opportunities facing Apple’s investors now.
Apple’s Challenges in 2024
The financial press made it abundantly clear that Apple had difficulty selling iPhones in China during 2024’s first fiscal quarter. You can go here, here and here to see the headlines signaling Apple’s slowing China iPhone sales.
Apple’s decision to give up on its electric vehicle model, the Apple Car, might also disappoint investors. Most likely, the Apple Car wouldn’t produce enough income for Apple to be worth the trouble.
As Barron’s explained, “Apple’s operating profit margins are in the range of 30%. Top-notch operating profit margins for a carmaker are in the range of 10%.”
Regarding the soft China iPhone sales, Apple is still opening its open its eighth store in Shanghai. With that, Apple will have 47 locations in China.
Clearly, Apple’s management isn’t just giving up on China and expects to revitalize the company’s smartphone sales there.
As for the Apple Car, investors should say, “Good riddance.” If the Apple Car wasn’t likely to be a strong income generator, then Apple is probably better off without it.
You Wanted an AAPL Stock Dip? You Got It!
These issues aren’t devastating to Apple in the grand plan of things. Remember, Apple still grew its revenue 16% year over year in Q1 FY2024. The company still has an excellent track record of beating Wall Street’s quarterly EPS forecasts.
Main Street Research CIO James Demmert suggests that there’s now “an opportunity” for investors as Apple is currently “getting no love from Wall Street.” Apple is also “getting no love” from investors, evidently, as AAPL stock got rejected at $200 and recently traded at around $170.
Consequently, Apple’s valuation should be attractive to bargain hunters. Consider that five-year average for Apple’s GAAP trailing 12-month price-to-earnings ratio is 27.23x. Currently, Apple’s P/E ratio is 26.6x.
The sector median P/E ratio is 30.03x. Thus, Apple appears to be somewhat undervalued on a relative basis. It’s probably just a matter of time before Apple stock returns to its usual, northbound long-term trajectory.
It May Be Time to Make Your Move With AAPL Stock
You may be reluctant to apply a buy-the-dip strategy with Apple stock. In particular, you might be worried about Apple’s soft China iPhone sales.
Apple isn’t just giving up on the iPhone in China, and besides, the company continues to generate strong revenue globally. All in all, AAPL stock has good recovery prospects this year, and it earns a confident “B” grade.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
