Apple’s (NASDAQ: AAPL) stock has slid modestly in the last week and a half, despite steeper-than-anticipated third-quarter earnings for fiscal 2021. Long-term investors may take advantage of the dip in pricing, but it also shows some difficulties that Apple has yet to overcome.
I have been very bullish about AAPL stock and it was one of our great stock picks two years ago that returned over 40% when everyone counted Apple out. We even thought it was a good covered call stock when it was in the $130s.
Like most of the tech sector, it has struggled a little and I am not sure if the growth and dividend make a “buy” right now.
The two most significant problems Apple is presently facing include privacy and supply issues. Let’s examine what that entails for iPhone users, hopefuls, and present and potential investors.
Table of Contents
Apple’s latest earnings did not provide sufficient momentum to AAPL stock
The AAPL stock price has fallen roughly a full percentage point since August 3 and has been edging to 1.8 percent
since the company announced third-quarter earnings on July 27. This isn’t a game-changing event, but it is a noteworthy decline in the share price—especially considering the tech behemoth has reported record profits for the quarter.
Apple’s earnings grew 36.44 percent year-over-year and exceeded expectations by 11.02 percent. During the same period, diluted EPS increased by nearly two times, resulting in a 28.16 percent increase over anticipated EPS.
Apple investors are expecting monetary success. However, Public anxiety hasn’t been allayed by the latest financial statement.
AAPL stock is declining due to privacy issues
On August 5, Apple made a rather sudden announcement that it plans to handle child sexual abuse more seriously. Specifically, Apple intends to employ new technology to find CSAM (child sexual abuse material) on iPhones.
Some people are rapt, while others are seriously concerned about Apple’s decision to scan personal content directly on iOS devices. It opens many possibilities for the company to do with data in the future and might stifle privacy rights that individuals feel they have. In addition, many individuals are concerned about Apple going through their personal photographs in such a manner, as it reminds them of George Orwell’s “Big Brother.”
It’s another example of what an increase in privacy may lead to in the future—greater observation from Apple that extends beyond CSAM.
The shortage of iPhone parts continues, with Apple preparing for a loss in iPhone production
The global semiconductor chip shortage was mentioned during Apple’s strong earnings call as one of the company’s biggest challenges. By now, most investors and customers are aware of chip scarcity’s impact on a wide range of industries, including technology and transportation.
Even though the chip shortage continues, Apple has maintained iPhone manufacturing rates at a high level. However, that is expected to change as “supply constraints,” as CEO Tim Cook calls it, will put a strain on production. This implies that future fiscal quarters’ growth will not be as strong as the most recent earnings release.
Should you still buy AAPL stock?
Investors should buy AAPL stock if it makes portfolio sense. Apple is a very solid company and likely to continue to see continued growth. A dip is an excellent opportunity for many investors to enter a position, especially when it occurs on a blue-chip stock with a proven track record. This is certainly the case with Apple, whose returns are likely to outlast any current issues surrounding AAPL stock. However, a downside investment might help shareholders compound their gains over time, even if it’s only in the form of averaging down.