What Just Happened to Apple Stock?

Once hailed as a must-own stock, Apple (AAPL) stock is struggling. The stock, which is among the magnificent 7, erased its December 2024 rally in recent weeks. After shares peaked at $260, Apple stock closed last week at $229.98 at a P/E of around 38 times.

The rich valuation is not the only reason the technology firm traded lower. Analysts at Evercore are unwilling to issue a buy rating. Instead, they rated the stock a tactical outperform ahead of its earnings report later this month.

The firm should benefit from the continued iPhone sales cycle, but China markets are a wildcard. Various industry research firms reported that Chinese domestic phone sellers outperformed Apple. If Apple lost market share, then Y/Y sales will likely decline.

Apple relied on discounts to drive iPhone 16 sales. This should stabilize demand levels in the Asian markets. However, it will lead to consumers relying on deals and promotions before they buy an iPhone.

Investors should expect Apple’s gross margin to meet the 66% to 67% guidance for the December quarter. In the upcoming report, look out for Apple to reaffirm its profit margins for the March 2025 quarter. Otherwise, AAPL stock could fall below $220. That would set up a downside risk in the $170 – $190 area.