Apple (NASDAQ:AAPL) has been disappointing investors so far in 2024 given its status as one of the ‘Magnificent Seven’. AAPL is supposed to be in an elite category of outperformers, but shares are down by 12% compared to a 10% gain in the Nasdaq Composite Index. In fact, Apple’s stock looks to be in trouble from a technical perspective as it is struggling to maintain the key support level established in October 2023.
With no particular news to drive up the price in the near-term, the bottom may not be in yet. But, investors are banking on FUD (fear, uncertainty, doubt), not fundamentals, to help drive shares back higher.
FUD frequently creates opportunities for long-term investors who know that the best opportunities frequently arise by ignoring near-term concerns at the expense of the longer-term outlook. To help you decide, here’s the bad and the good about Apple stock.
It’s Been a Bad Month for Apple
Apple has attracted negative attention with iPhone sales in China dropping 24% in the first six weeks of 2024, according to an industry report. Wedbush analyst Dan Ives, one of the Street’s top Apple pros, noted that while sentiment resembles “that of a horrow show right now” in China, the company will see “brighter days” ahead.
The company is also abandoning its vehicle project after begining work on what it called “Project Titan” in 20214. Apple is also appealing a $2 billion antitrust ruling from the European Union over allegations that it severly restricted competition in the music streaming space due to restrictions on its App Store. The appeals process is likely to last years, but it’s still a headwind the company doesn’t need.
These headwinds provide more than enough material for investors to continue holding their short position and betting against Apple stock. In fact, Apple is one of the most heavily shorted stocks by institutional investors and hedge funds.
Can AI Save the Day?
If you’re bullish on Apple’s stock, you’ll likely point to the company’s upcoming Worldwide Developer Conference (WWDC) in June. Historically, this has been the time when Apple makes major announcements.
This year investors are expecting to hear about iOS 18, regarded as one of the biggest iOS updates in the company’s history. This anticipation is largely because iOS 18 will introduce features from Apple’s own proprietary large language model (LLM). In other words, the company is hoping to make a splash with its own generative AI model.
The new features are expected to be compatible only with iPhone 11 models and newer. This could be a catatlyst as compelling new features will likely push millions of users of older phones to upgrade their devices.
Two Things Can Be True
Like many stocks, Apple is what investors believe it to be. Currently, analysts are of the opinion that Apple is diminishing in its role as a leading-edge disruptive innovator. If that’s true then the company’s valuation is problematic. After all, Apple is one of the most widely held stocks in the world. Bad news of any sort has an outsized effect on AAPL stock and the broader market.
On the other hand, if Apple delivers on what investors hope is a blockbuster WWDC, the fortunes of the stock will quickly change, and you wouldn’t want to be on the wrong side of that trade.
However, when evaluating through technical indicators, the stock appears to be oversold. As of midday trading on March 6, 2024, the relative strength indicator (RSI) for Apple is at 23.14. The RSI is a momentum indicator, and any reading below 30 suggests oversold conditions exist for a stock.
This is a reminder that two things can be true of a stock at a given time. The short-term outlook for Apple is cloudy, but this is a stock that has consistently outperformed the market for over 15 years. Patient long-term investors might consider using FUD to their advantage and enhance their holdings.
