Apple stock at a crossroads, is now the time to buy?

Key Points

• Apple's stock has seen a significant decline, nearly 6% since the year began.
• Recent analyst actions have painted a cautious picture, as the stock has received several downgrades.
• The looming threat of a U.S. antitrust lawsuit against Apple indicates potential regulatory challenges ahead.

Apple Inc. NASDAQ: AAPL stands as a towering figure in the world of stocks and investments, a testament to the power of innovation and resilience in the tech industry. However, recent price action have put Apple's stock in the spotlight, sparking discussions about its prospects and ability to hold onto the top spot as the most valuable company in the world.

As the price has sharply declined in recent trading sessions, signaling a potential bargain buy for some, investors are also eyeing other crucial factors. Recent analyst actions, comments, and new challenges are emerging as essential considerations in the decision-making process.

Apple's ascent to the summit of the corporate world is no secret. Boasting an enormous market cap of $2.82 trillion, it holds the crown as the most valuable company globally. However, Microsoft is hot on its heels with a market cap of $2.73 billion. The brand's ecosystem, spanning from iPhones and Macs to services like Apple Music and iCloud, has cemented its position in the lives of millions worldwide.

Apple stock rapidly approaches the 200-day SMA

Since the year began, Apple's stock has hit a bumpy road, dropping nearly 6%. A further worrying sign for Investors is the slope of the declines. The stock has experienced steady selling, having declined for four consecutive days, edging closer to a critical technical level: the 200-day Simple Moving Average (SMA).

The sharp pullback may present a favorable buying opportunity from a technical analysis perspective. The last time the stock traded into its 200-day SMA was October last year. That proved an opportune time to purchase the stock, as it traded to a new all-time high two months later. If that is the case this time, investors and traders will want to see the stock firmly build a base above its rising 200-day SMA.

However,  unlike October last year, sentiment has shifted as recent analyst actions and a U.S. antitrust lawsuit raise uncertainty and potentially dampen investors' confidence in the short term. 

Recent analyst actions

This dip in Apple's performance has piqued the interest of analysts and market watchers alike. While the consensus analyst rating for Apple remains positive, with a Moderate Buy rating and price target forecasting over 10% upside, analyst actions have been overwhelmingly bearish since the beginning of the year. 

Last Tuesday, Barclays downgraded Apple from Equal Weight to Underweight, lowering its price target from $161 to $160. Following this, on Thursday, Piper Sandler analyst Harsh Kumar downgraded Apple from overweight to neutral, setting a more optimistic price target of $205 compared to Barclays' $160.

Kumar's downgrade was part of a broader analysis of tech companies in the semiconductor chip industry. He expressed concerns about iPhone sales growth, especially in China, due to the country's economic slowdown. Kumar also highlighted Apple's elevated price-to-earnings valuation ratio, signaling a departure from its historical levels and potential overvaluation.

The U.S. government preparing antitrust lawsuit

Apple's shares dipped by under 1% on Friday following a report from The New York Times stating that the U.S. Department of Justice is gearing up to file an antitrust lawsuit against the tech giant. The potential lawsuit might target Apple's exclusivity of the Apple Watch with iPhones and the sole availability of its iMessage service on Apple devices. Additionally, the lawsuit could scrutinize Apple Pay, the company's payment system.

If the lawsuit materializes, it would present Apple's most significant antitrust challenge in years. The U.S., being Apple's largest market, amplifies the importance of how iMessage and the Apple Watch function, which Apple argues are integral features distinguishing iPhones from Android devices.