Why Investors Should Reconsider Buying the Dip on Apple Stock (AAPL)

Business Insider

4 hours ago

The year 2025, so far, hasn't been kind to Apple (AAPL) shareholders. The stock is trading below the $200 mark—about 25% off its all-time highs—making it the worst performer among the top seven tech stocks right now. This is a sharp contrast to the 22% total annualized returns Apple has delivered to shareholders over the past decade.
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While the recent bearishness isn't entirely unjustified — higher import fees are putting pressure on Apple's product margins, and sticky interest rates continue to weigh on consumer spending — I don't believe the stock is doomed for an extended correction. Historically, Apple has proven to be a great stock to own during periods of relative weakness like this, especially when valuations reset to more reasonable levels.
That said, when it comes to high-quality stocks like AAPL, buying just because momentum looks weak isn't always the best strategy. For now, until the trends start to improve, I remain Neutral on AAPL stock.
Understanding Apple's Position Amid Trade War Challenges
Among the Magnificent 7 stocks, Apple's recent performance clearly reflects that markets view the company's thesis as one of the most fragile, mainly due to growing concerns around the ongoing trade war.
The possibility of new tariffs on imported products resurfaced after the U.S. president threatened to impose a 25% tariff on iPhones manufactured outside the U.S. No doubt, this would be a blow to Apple's bullish case. Growth estimates are likely to be revised downward for the coming quarters—and possibly even years. However, if we step back and look at the bigger picture, these fears might actually be somewhat exaggerated, as TipRanks' risk analysis shows.
For one, history shows that tariff threats are often more a political negotiation tool than something that is actually enforced. Additionally, under the highly efficient leadership of CEO Tim Cook, Apple has consistently demonstrated its ability to navigate supply chain challenges. We saw this play out back in 2018-2019, during Trump's first administration, when the U.S.-China trade war intensified. Apple responded quickly by expanding its production outside of China, significantly reducing its reliance on the country.
Approximately 75% of Apple's revenue still comes from hardware, which is more susceptible to tariff risks. But here's the other side of the coin: Apple's services segment has grown massively and now accounts for around 40% of operating profit. This part of the business—driven by recurring revenue streams like the App Store and licensing deals (think Google) — is far less exposed to trade war impacts. In fact, I believe the services business is still underrated by the market and remains one of Apple's most powerful growth engines today.
The Valuation Story Behind Apple's Recent Moves
Naturally, when tariffs threaten to impact Apple's core business, combined with a broader 'crash correction' where markets rush for cash and liquidity, and the stock is trading at elevated valuation multiples, the outcome tends to be a bearish reaction.
Currently, Apple trades at 27.3x forward earnings, which is significantly below the 36x peak reached in January and also below its 12-month average of 31x. While long-term EPS growth expectations aren't particularly exciting at around 10% CAGR, a PEG ratio of 2.5 honestly doesn't seem outrageous for a company with fundamentals as strong as Apple's.
But the key point in this case may be that Apple shouldn't be trading at cheap multiples and probably never will, simply because it's a company with a historically low risk of underperformance. While tariffs might seem like a threat, as I've highlighted before, Apple has faced similar headwinds not long ago and managed to navigate them successfully.
After all, we're talking about a business with one of the strongest brands and the highest customer loyalty in the world. And when the numbers are crunched, Apple's services segment alone is arguably worth $1.7 trillion—that's more than half of the company's current market cap.
Why 'Buy Low, Sell High' Isn't Always Right
Although it may seem counterintuitive, I tend to believe that when it comes to high-quality stocks, the old saying 'buy low, sell high' is somewhat of a misnomer, mainly because no one actually knows where 'low' and 'high' truly are.
If you think about it, 'sell high' would've meant selling AAPL (or any other high-quality tech name like MSFT, AMZN, and NVDA) multiple times over the past decade, expecting some massive correction that, honestly, either never came or only briefly happened. Meanwhile, you would have missed out on a ton of upside.
That said, it's pretty well known that great stocks—the kind that isn't super cyclical and has rock-solid fundamentals (like Apple)—tend to perform better on a risk-adjusted basis when they're trending higher, not when they're at some mythical 'bottom' or during ugly corrections. And honestly, that pretty much describes where AAPL is right now: stuck in a weak momentum phase.
The reality is that when high-quality stocks are in a clear uptrend—meaning trading above long-term moving averages like the 200-day—they deliver lower drawdowns, better Sharpe ratios, and just generally smoother, more consistent returns. In Apple's case, sitting at $198 per share, it's well below its 200-day moving average of $223.50, which is a clear signal of bearish momentum.
My take is that I would be comfortable going heavy on the stock only if it starts showing a steady recovery. Otherwise, simply stepping aside when the chart is falling apart may be the wisest course of action.
Is Apple a Buy, Sell, or Hold?
While there's certainly room for skepticism, the consensus among AAPL analysts remains mostly bullish. Out of 29 experts covering the stock, 16 rate it a Buy, nine rate it a Hold, and only four recommend Sell. AAPL's average price target stands at $226.94, suggesting about 15% upside from the current share price.
Don't Buy AAPL's Dip Just Yet
Apple is in bear territory—and in my view, for somewhat justified reasons. As a high-quality stock with pristine business fundamentals (both subjectively and quantitatively), many Apple bulls may be tempted to jump in on the 'buy the dip' opportunity as valuations fall from their peaks. And while that approach makes sense, the reality is that no one ever truly knows how low Apple's valuation can go.
Historically, high-quality stocks tend to behave better when they're near a peak rather than stuck in the middle of corrections. That's why, personally, I would prefer to wait for more apparent signs of a reversal. Even if that means giving up part of the upside, the trade-off is entering with a better risk-adjusted setup backed by stronger technical confirmation. Bottom line, I believe Apple is a Hold for now.