Absent broader context, consumer technology giant Apple (NASDAQ:AAPL) appears like a no-lose proposition. Despite some bearish calls that the Apple stock price is stretched – including my own two cents – shares have continued to defy gravity and the critics. On a year-to-date basis, AAPL is up over 50%.
Again, by any other standard, this should drive enthusiasm toward AAPL stock. Although neither our domestic nor the global economies suggest much to look forward to, Apple is defying the odds. Like the bullish case for Nike (NYSE:NKE), the company enjoys almost unprecedented, deep-seated popularity with their worldwide consumer base.
Thus, even with the ugliness over the U.S.-China trade war, the Apple stock price may enjoy a reprieve. Despite pressures on the global consumer, the Apple brand has a powerful social cachet: people will sacrifice to get the latest smart device iteration from Cupertino.
Moreover, Apple is delivering the goods. Last month, the company unveiled its latest flagship portable product, the iPhone 11 Pro. One of the most heavily marketed features of the 11 is its three lenses. Featuring wide, ultra wide and telephoto angles, this groundbreaking innovation amplifies the usability of the now-ubiquitous integrated camera.
Given selfie culture and the popularity of video platforms like Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube, Apple finally did something to push the envelope. Theoretically, this should help lift AAPL stock.
Further, the tech firm is getting into the streaming game with Apple TV+. Launching with an introductory price of only $4.99 a month, it undercuts every other streaming competitor, including the big shots Disney (NYSE:DIS) and Netflix (NASDAQ:NFLX).
Are these factors reason enough to buy Apple stock? It depends on your perspective.
Comprehensive Headwinds Overwhelm Apple Stock
Let me begin with a quick aside. Like many sports fans, I’ve been fascinated with the Rugby World Cup, which is held in Japan for this edition. However, incoming Typhoon Hagibis forced a match cancellation, a first in World Cup history. Hagibis also threatens at least part of the Formula 1 Japanese Grand Prix, which is held this weekend.
Prior to the match cancellation, debate erupted over how the organizers should respond to the inclement weather. And in some ways, I see a parallel with Hagibis and AAPL stock. Yes, Apple has many things going for them, and they’ve also proven doubters wrong.
However, this victory could be short lived. As with the World Cup, a storm threatens Apple stock.
Of course, I’m referring to an economic storm. While Apple products have historically performed well because folks apparently couldn’t get enough of the “i-this and i-that,” even these device fanatics have their financial breaking point. Given the discrepancies in per-capita spending power between the average American and Chinese consumer, the latter may face more difficulties.
In an email correspondence, Victor Shih, Ph.D., associate professor of political economy at the University of California, San Diego, wrote:
Both the trade war and food-driven inflation likely will crimp Chinese consumers’ discretionary spending. While the trade war has slowed employment growth and wage growth, the African swine flu has driven up food prices substantially. For the average households, they are trapped between much higher food prices and uncertainties about future income. This will limit their spending on discretionary items.
Put another way, AAPL stock may be on a winning path right now. But that’s not guaranteed to sustain. As known pressures tighten their stranglehold, the impact will invariably filter down.
How to Tackle AAPL Stock
As I mentioned earlier, how you approach Apple stock depends on your perspective. To clarify, if you have a short-term timeline, AAPL could bring some quick profits. But for everyone else, I encourage you to consider some storm-watching. The headwinds working against this tech firm are unquestionably ugly.
Furthermore, in years past, Apple, along with many other organizations, relied heavily on the Chinese consumer. With a population size four-times greater than the U.S., this approach made sense.
But at the present juncture, China is a major risk factor. As Professor Shih noted, the average Chinese consumer is feeling the heat. Given the choice of buying food to live or buying an iPhone 11, I don’t have to spell out the correct answer. Therefore, anybody who is not a day trader should probably avoid or cash out of AAPL stock.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.