The more Apple stock falls, the more tempting it looks!
The past few months have seen shares in Apple (NASDAQ: AAPL) moving the wrong way. Apple stock is down 16% so far in 2025.
Still, though I say it is ‘the wrong way’, maybe that is not true for me. After all, I do not own any shares in the tech giant but think it has a brilliant business model and strong prospects.
So, if the stock falls far enough, perhaps I could use the opportunity to add Apple back into my portfolio. How attractive does it look right now?
High-quality company, but at a high price
Currently, Apple stock trades on a price-to-earnings ratio of 33. That looks pricy to me. So, although the share has been falling, it has not yet hit the sort of valuation at which I would be happy to add some to my portfolio.
The reason for that is simple: like Warren Buffett, I like to buy into great companies, but at an attractive share price.
Buffett himself is still a big shareholder in the iPhone maker, although he has sold a large part of his stake over the past couple of years. I also am attracted to the proven business model and strong economics of Apple. It has a prestigious brand, a captive audience of existing tech, software, and service users, high profit margins, and lots of proprietary technology.
At the right price, I would be happy to snap up the share. It needs to fall further for me to do that, though.
Challenges on multiple fronts
Why do I care so much about price? After all, if Apple is as strong a company as I think, does it matter?
I think the answer is a resounding ‘yes’, for two reasons.
First, although Apple is indeed a strong business, it faces multiple risks. Tariff disputes are making its complex supply chain more difficult to manage cost effectively. Competition from lower-cost Chinese competitors threatens its market share in some areas. A lack of product innovation could also hurt revenues over time.
The second reason I think price matters is because even a great business can make for a poor investment. After all, what I see as the strengths of Apple were also true at the start of the year – but the 16% decline I mentioned above means that $1,000 invested then would now show a paper loss of $160.
That is before I even take into account the possible impact of exchange rate movements over the past few months, something that can affect the return a British investor earns when buying into US stocks like Apple.
One for the watchlist
So, with an eye to maintaining what Buffett refers to as a “margin of safety”, for now at least I will not buy Apple stock.
Even given the risks, I continue to rate Apple as a top-quality company. I plan to keep an eye on the share price, in case a further fall could present me with a future buying opportunity.
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C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
