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Is Apple Stock A Buy Amid Antitrust Lawsuit Drama?

Consumer electronics giant Apple (AAPL) faces a litany of challenges that have weighed on Apple stock, including an antitrust lawsuit by the U.S. Department of Justice. Still, many investors might be wondering if AAPL stock is a buy right now.

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The Justice Department sued Apple on March 21, accusing the Cupertino, Calif.-based company of violating antitrust laws with its restrictive iPhone and App Store policies. The lawsuit alleges that Apple's conduct makes it harder for Americans to switch smartphones, undermines innovation for apps, and imposes extraordinary costs on developers, businesses and consumers.

In a statement, Apple said the lawsuit is "wrong on the facts and the law" and vowed to "vigorously defend against it."

Wall Street analysts said the case will be a headline risk for Apple, which has a good chance of beat the rap. But the lawsuit could take three or four years to wind its way through the legal system.

Apple's List Of Woes

Other issues weighing on Apple stock include weak iPhone sales in China and legal problems over its App Store policies in Europe. Investors also are concerned about Apple lacking a strategy for artificial intelligence.

Apple is playing catch-up with Big Tech rivals in AI, especially generative artificial intelligence. The company's AI initiative is going to be a costly undertaking and profits could take a near-term hit, according to Deepwater Asset Management.

Meanwhile, in late February, Apple decided to end development of an autonomous electric car after a decade of work. Apple reportedly spent more than $10 billion on the Apple car project before shutting it down to focus on AI.

On a positive note, Apple returned to sales growth in its fiscal first quarter, thanks to iPhone 15 handset sales and services. Before the Q1 report, Apple's sales had fallen for four straight quarters on a year-over-year basis.

But Apple's sales in China fell 12.9% year over year in the December quarter amid heightened competition from Chinese handset makers.

Apple Opportunities For Growth

With the iPhone business maturing, investors are wondering what the next big growth driver will be for Apple stock.

Recently, two businesses have given Apple's sales and profits a boost: services and wearables.

In the December quarter, Apple's services revenue increased 11% to $23.1 billion. At the same time, its hardware sales rose just fraction year over year to $96.5 billion.

Apple's services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings.

On Oct. 25, Apple raised prices for multiple subscription services, including Apple TV+ and its Apple One bundles.

However, Apple is facing antitrust scrutiny in the U.S., Europe and Asia for its App Store policies, including its 30% commission fee. In Europe, Apple must comply with the recently enacted Digital Markets Act.

Apple Vision Pro Hits The Market

Meanwhile, Apple launched its first major new product in nine years on Feb. 2 with Apple Vision Pro. The spatial computing headset starts at $3,499 and is only available in the U.S. for now.

Apple Vision Pro is part of Apple's push into the wearables market, following the success of the Apple Watch and AirPods wireless earbuds.

The first weekend of availability for Apple Vision Pro saw consumers lined up at Apple retail stores to try out the new spatial computer. The computer goggles combine virtual and augmented reality.

The headset can play virtual-reality content and simulate augmented reality using video pass-through to show the real world. It is designed for entertainment, communications and productivity applications.

Apple unveiled Vision Pro last June at its Worldwide Developers Conference. But Apple stock fell 0.8% after the announcement. Critics on social media derided the new product as "nerd goggles."

While the technology is impressive, the high price will limit sales to well-heeled early adopters, analysts said. The killer app for the Vision Pro headset could be watching "spatial video."

Launching the Apple Vision Pro is one of the company's key challenges in 2024. Another is finding a strategy in the burgeoning market for artificial intelligence.

Apple Earnings Report Mixed

Late on Feb. 1, Apple topped Wall Street's estimates for the December quarter, but signaled a sales decline in the March quarter. Apple stock dropped 0.5% in the next trading session.

Apple earned $2.18 a share on sales of $119.6 billion in the quarter ended Dec. 30. Analysts polled by FactSet had expected Apple earnings of $2.10 a share on sales of $118 billion. On a year-over-year basis, Apple earnings increased 16% while sales rose 2%.

For the current quarter, Apple guided to sales of about $90 billion, down 5% from the same period last year. Analysts had been modeling $95.6 billion for the fiscal second quarter.

In the December quarter, Apple's iPhone revenue increased 6% to $69.7 billion and accounted for 58% of the company's total sales.

Apple's Mac computer sales rose a fraction to nearly $7.8 billion. However, iPad tablet sales plummeted 25% year over year to $7 billion.

Finally, revenue from Apple's wearables, home and accessories unit declined 11% to about $12 billion.

The company's next earnings report is due in late April or early May. That could be a catalyst for Apple stock.

Another potential catalyst will be the company's Worldwide Developers Conference in June. At WWDC, Apple is likely to reveal its innovations in AI.

Apple Stock Falls Below $3 Trillion Value

In January 2022, Apple became the first company to reach a market value of $3 trillion. But it failed to stay above that level and didn't return to it until mid-2023.

Apple stock closed above a $3 trillion market cap for the first time on June 30. However, its current valuation is $2.66 trillion.

Microsoft (MSFT) recently surpassed Apple's market value to become the world's largest company by market capitalization. Microsoft's current market cap is $3.19 trillion, boosted by its leading role in the artificial intelligence megatrend.

Apple's Storied History

Apple has been an American success story several times over. First, it ignited the personal computer revolution in the 1970s with the Apple II. Then it reinvented the PC in the 1980s with the Macintosh.

Co-founder Steve Jobs returned to run Apple in 1997 and oversaw a winning streak of innovations that included the iMac, iPod, iTunes, iPhone, iPad and the App Store.

The biggest driver of Apple's modern success is the iPhone. The game-changing smartphone, which debuted in 2007, sparked years of massive growth and created a loyal base of customers willing to buy Apple products and services.

Apple has an installed base of more than 2.2 billion devices in use today, including well over 1 billion iPhones.

Exclusive Apple Stock Ratings

AAPL stock has an IBD Relative Strength Rating of 25 out of 99. The Relative Strength Rating shows how a stock's price performance stacks up against all other stocks over the last 52 weeks.

Apple stock has an IBD Composite Rating of 59 out of 99, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings of fundamental and technical performance into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.

Apple is one of the Magnificent Seven stocks, which fueled the big stock market rally in 2023.

Plus, Apple ranked No. 5 on IBD's 2022 100 Best ESG Companies list. ESG is short for environmental, social and governance.

AAPL Stock Technical Analysis

Last year, Apple stock climbed 48.2% to 192.53. But AAPL stock ended the regular session March 22 at 172.28.

On Dec. 14, Apple stock notched a record high of 199.62. Shares rose on a positive report from contract manufacturer Foxconn, which assembles Apple's iPhones.

In a negative sign, Apple stock is trading below its 50-day moving average line. Plus, its relative strength line has been falling lately as it underperforms the S&P 500 index.

Apple stock has an IBD Accumulation/Distribution Rating of D, indicating selling by institutional investors.

Is Apple Stock A Buy Right Now?

Apple stock is not a buy right now.

It needs to form a new base in the right market conditions before setting a potential buy point. Check out IBD's Big Picture column for the current market direction.

Keep an eye on the overall stock market. If the market turns south, don't try to fight the general stock market direction.

To find the best stocks to buy and watch, check out IBD's Stock Lists page. More stock ideas can be found on IBD's Leaderboard, MarketSurge and SwingTrader platforms.

Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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