Investment Experts: These Are Our 5 Concerns About Apple
Written by
Jordan Rosenfeld
Edited by
Levi Leidy
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Big-name companies like Apple are most likely already in your investment portfolio because they have a reliable business model that is known to perform well in the stock market. However, even the most thriving business is still subject to the whims of the market, supply-and-demand issues and other problems. Apple is no exception.
While it’s a good stock to hold in many ways, investment experts do have some concerns about the tech giant that you may want to consider when investing.
Overreliance on iPhone Sales
While Apple is a tech leader, its overreliance on iPhone sales concerns Vincent Cerniglia, principal and vice president of Noreast Capital Corporation. He advised caution in investing heavily in any single company, especially if demand slows or rivals release quality alternatives at lower price points.
Supply Chain Risks
Additionally, Cerniglia said, “Supply chain risks also worry me. Many components are made in China, exposing Apple to trade war costs and supply chain disruptions that could reduce profit margins.”
Certainly, as the COVID-19 pandemic revealed, unforeseen events such as viruses and war can disrupt supply chains.
Increased Competition
Though Apple will likely remain successful, Cerniglia worried that its growth may slow in emerging or saturated markets as more competition arises.
“The smartphone market is maturing, and competitors are releasing affordable, high-quality devices. If Apple’s premium model loses appeal or lower-cost rivals win market share, financials and stock price could suffer.”
Regulatory Challenges for Apple Pay and FinTech Growth
Other areas of concern, according to Angelo Crocco, CPA and owner of AC Accounting, have to do with regulatory challenges.
“Apple’s been pushing hard into financial services with things like Apple Pay and the Apple Card, and while that’s opening up new revenue streams, there’s also some risk here that’s easy to overlook,” he said.
In Europe, regulators are already starting to question whether Apple’s tight grip on the NFC technology that powers Apple Pay is stifling competition, he explained.
“If they’re forced to open up their NFC system to other companies, Apple could lose some of the dominance it’s built in the digital payments space. This could hit their bottom line, especially in markets where regulatory bodies are becoming more aggressive.”
He said it’s something that Apple investors need to keep an eye on.
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Wearables and Health Tech Are a Fragile Market
Another area where Apple may be losing dominance is in its “wearables” such as the Apple Watch and AirPods.
While wearables have been successful so far, Crocco said the company is very reliant on continuous innovation, especially in the health space.
“If Apple doesn’t keep delivering meaningful updates like better health-tracking features, demand could start to flatten out, and we’ve seen that happen before with other tech products,” Crocco explained.
The Takeaway
Apple’s overreliance on a single product line in an increasingly competitive space gives reason for caution despite its brand and cash position, Cerniglia said. “Revenue and stock price are closely tied to iPhone success, so diversification would strengthen [its] position.”
In lieu of being able to influence any of these factors as an individual investor, for balance, Apple should be part of an investment portfolio but not necessarily an outsized holding, Cerniglia suggested.
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