Why Apple stock is down 17% so far this year

Investors have been concerned about the company's supply chain problems.

| More on:
Man in a cannabis greenhouse looks unhappy and puts his thumb down.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened 

Apple (NASDAQ: AAPL)'s stock, like most other technology stocks, has taken investors on a rollercoaster ride this year. While the company's share price was volatile in the first few months of 2022, a significant downward trend began after the company reported second-quarter results in late April. 

The stock hasn't recovered since. Year to date, Apple is down 17%, according to data provided by S&P Global Market Intelligence. This is mostly because investors are concerned that Apple won't escape the effects of supply chain shortages and a potentially slowing economy. 

So what 

Investors fell into a pessimistic mode in late April after Apple released its second-quarter financial results. Apple beat analysts' consensus estimates for both top and bottom lines, but investors latched on to comments made by the company's management.

On the company's earnings call, CEO Tim Cook said that Apple was "not immune" to supply chain problems caused by COVID-19, chip shortages, and the war in Ukraine. 

Apple's chief financial officer, Luca Maestri, spoke more specifically about the company's supply chain problems and said they could hurt Apple's sales in the third quarter by as much as $8 billion. 

"Supply constraints caused by COVID-related disruptions and industrywide silicon shortages are impacting our ability to meet customer demand for our products. We expect these constraints to be in the range of $4 billion to $8 billion, which is substantially larger than what we experienced during the March quarter," Maestri said. 

Clearly, investors didn't want to hear that Apple's sales could be affected to this degree and sent the stock on a downward path. 

Now what 

Apple investors will want to keep a close eye on the company's third-quarter results, which will be released on July 28. The results should shed some light on how bad supply chain difficulties have become for Apple and if the company has experienced any pullback in consumer demand. 

With inflation still at its highest level in nearly 40 years and the Federal Reserve focused on hiking the federal funds rate in order to bring it back down, it's likely that Apple investors could experience some more short-term volatility from the stock as the market reacts to a potential economic slowdown. 

But long-term investors should also consider that while temporary supply constraints could affect the company, Apple still has the potential to be a great investment. First off, the company still generates tons of cash -- $28 billion in operating cash flow in the recent quarter -- which will help it weather any potential economic slowdown better than other companies. 

And while Apple's stock isn't necessarily cheap right now, its shares trading at 23 times the company's forward earnings, the recent stock sell-off does give investors an opportunity to add some shares of this immensely profitable company at a relative discount. 

Lastly, Apple continues to both add value to shareholders through buybacks and invest in new products. The company added $90 billion to its share repurchase program in the most recent quarter and could enter a new product segment within the next year. 

With Apple's shares down this year -- and the company still in a very strong financial position -- investors may want to consider snatching up some shares of Apple right now.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Chris Neiger has positions in Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Young couple having pizza on lunch break at workplace.
Consumer Staples & Discretionary Shares

Is Warren Buffett buying Domino's shares while they're down?

Could this be a vote of approval?

Read more »

Close up portrait of happy businesswoman standing in front or leading her multi-ethnic corporate team.
International Stock News

These are the 6 top-performing stocks in the Nasdaq-100 with 2024 almost over

Which stocks are leading the Nasdaq-100 higher in 2024? This diverse bunch of leaders is taking the market by storm.

Read more »

Scared looking people on a rollercoaster ride representing the volatile Mineral Resources share price in 2022
International Stock News

Are interest rates to blame for the shaky Nasdaq Index last night?

US markets were volatile overnight.

Read more »

A young entrepreneur boy catching money at his desk, indicating growth in the ASX share price or dividends
International Stock News

Why this high-flying investor is selling Tesla shares and buying this US tech stock instead

Ark Invest funds have been selling the electric vehicle maker's stock over the last few weeks and reinvesting the proceeds…

Read more »

two computer geeks sit across from each other with their laptop computers touching as they look confused and confounded by what they are seeing on their screens.
International Stock News

Is Nvidia stock heading to $175?

The bulls are lining up ahead of Nvidia's earnings report next week.

Read more »

A woman holds a bitcoin token in her hand as she smiles at the camera in the background.
International Stock News

Bitcoin keeps soaring. Could it hit $95,000 this week?

Could the current crypto rally have enough juice to push the coin above that once-inconceivable level?

Read more »

A boy in a green shirt holds up his hands in front of a screen full of question marks.
International Stock News

2 reasons to buy Nvidia shares before November 20 (and 1 reason to wait)

This top AI stock has soared nearly 200% this year!

Read more »

A group of friends push their van up the road on an Australian road.
International Stock News

Why Tesla stock just pulled back

Tesla finally hit a speed bump after a blistering post-election rally.

Read more »