- Apple stock (AAPL) - Get Free Report may be having a rough 2022, and certain days of trading have been painful to watch this year.
- But over 22 years ago, AAPL endured single-day losses that few investors would handle with much grace today. The stock was down about 52% on September 29, 2000.
- Could a similar selloff in shares of the Cupertino company happen again now? What would be the implications?
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Most AAPL investors would cringe at the sight of share price dropping a few percentage points for the day. In 2022, AAPL’s worst day of performance happened on September 13, on the heels of another ill-received inflation report: the stock was down 5.9%.
But nothing that happened so far this year comes close to what Apple shareholders experienced over 22 years ago, on September 29, 2000. Back then, when the Cupertino company’s equity was worth a mere $18 billion in market cap, the stock sank by an impressive 52%.
The main reason for such a massive selloff was Apple’s earnings warning for the last fiscal quarter of 2000. The company projected below-consensus results due to a few factors that included soft education-related sales and a disappointing Power Mac G4 Cube.
Of course, context is needed here. We are certainly not talking about a one-off drop in quarterly revenues. The year 2000 marked the beginning of the downfall of the entire tech sector, which would eventually be written into the history books as the “dot-com crash”.
Tech stocks suffered greatly in 2000. The chart below shows how AAPL (blue line) itself sank by an astounding 70% or so in that year, greatly underperforming the S&P 500 (red line) and even the Nasdaq (green line).
Apple stock’s annualized volatility in 2000, according to Portfolio Visualizer, was an eye-popping 83%. For reference, AAPL’s volatility in the past decade has been a much tamer 28%. When uncertainty is this high, wide swings in share price are not uncommon.
Tech stocks were very shaky in 2000 in great part due to “irrational exuberance” that led to the formation of a speculative bubble in the late 1990s. But also, the US economy had started to experience what would then become a full-scale recession in the early months of 2001.
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Could Apple Stock Ever Fall This Much Again?
Some Apple investors could ask: if losses of over 50% in a single day have happened before, might AAPL slide this much again in the future?
When it comes to equity investing, the most cautious answer here would be “anything is possible”. But in practice, it is highly unlikely that Apple stock would ever sink this much in a single day – this is not to say that 50%-plus losses could not happen over longer periods, however.
Here is a list of reasons why I think that AAPL investors might not need to worry:
- Apple today is a much more mature company than it was in 2000. For example, the company sold nearly $400 billion in products and services over that last year, but only less than $8 billion in 2000.
- Apple is still highly dependent on the iPhone today, which represents about half of the company’s total revenues. However, the company is better diversified geographically (57% of revenues outside the Americas) and into more stable and predictable businesses like services (about 20% of total revenues and 33% of operating profits). Back in 2000, Apple was predominantly a MacIntosh vendor (iMac, iBook, PowerMac, and PowerBook), and 54% of total revenues came from the Americas.
- As bad as 2022 has been, it is unlikely that we are heading toward another 2000-style meltdown in tech stocks. In fact, some large names have already corrected by more than 70% from the peak – think of Meta (META) and Roku (ROKU), for example. Yet, despite being in a bear market territory, AAPL has been holding together just fine.
Having said the above, the potential crumbling of Apple stock, if it were ever to happen, would almost certainly spell disaster for the rest of the US stock market. Keep in mind that AAPL is now worth over $2 trillion, and it represents about 6% of the entire S&P 500 index.
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)