Apple (NASDAQ:AAPL) shares remains one of the most traded stocks, but the firm hasn’t demonstrated as much volatility as its tech peers.
Having said that, recent performance has been uncharacteristically poor. The stock has fallen 20% over the past year. But it’s worth highlighting that Tesla has fallen 64% over the same period.
Despite the fall, Apple is still worth $2.14trn. To put this in context, that’s equal to the GDP of Brazil — a country with a population of 214m. It was the first company to achieve a stock market valuation of $1trn (2018), $2trn (2020), and $3trn (2022).
So let’s take a look at how successful a two-year investment in Apple would have been and explore where the share price could go next.
2-year performance
Over two years, Apple stock is up 5%. That’s clearly not great for a stock that barely pays a dividend.
One thing that would have helped my investment is the weakening pound. It’s around 10% weaker against the dollar today than it was two years ago. This means that my £500 investment two years ago would be worth around £570 today.
However, I’d probably be kicking myself for not selling last summer when the share price was around 25% higher than it is today.
What’s moving the share price?
The stock performed uncharacteristically poorly in 2022. This is largely due to bear market conditions as a result of high inflation and rising interest rates, which sparked fears of a recession.
However, Q4 demonstrated that Apple was able to buck the trend and outperform the market. It posted a September quarter record, with revenue at $90.1bn, up 8% year over year, and quarterly earnings per diluted share of $1.29, up 4% year over year.
Q1 results, due on 2 February, could send the share price surging if the firm further demonstrates its resilience.
There are several positives to consider right now too. Apple’s share of the smartphone market has increased to 16.5% in 2021 from 14% in 2017. Margins are also remaining strong, with gross margins rising from 41.8% in 2021 to 43.3% in 2022.
Despite the inflationary environment, margins in the long run may also be preserved by the ‘China plus one’ strategy. Like other firms, Apple is reducing its reliance on China, primarily due to geopolitical issues.
But its new production hubs in India and Vietnam offer much cheaper labour costs than in China, as well as production-linked incentives. This could allow contract manufacturers like Foxconn, Pegatron and Wistron — all now producing in Tamil Nadu — to bring production costs down.
So would I buy Apple stock? I’m definitely keeping a close eye on the tech giant. Its one of Warren Buffett’s favourite firms, so that’s definitely a positive.
But my main concern is a weakening dollar, and that it could wipe out any share price gains in pound terms. As such, I’m not buying yet.
