Image source: The Motley Fool
The past few months have seen shares in Apple (NASDAQ: AAPL) moving the wrong way. Apple stock is down 16% so far in 2025.
Still, though I say it is ‘the wrong way’, maybe that is not true for me. After all, I do not own any shares in the tech giant but think it has a brilliant business model and strong prospects.
So, if the stock falls far enough, perhaps I could use the opportunity to add Apple back into my portfolio. How attractive does it look right now?
High-quality company, but at a high price
Currently, Apple stock trades on a price-to-earnings ratio of 33. That looks pricy to me. So, although the share has been falling, it has not yet hit the sort of valuation at which I would be happy to add some to my portfolio.
The reason for that is simple: like Warren Buffett, I like to buy into great companies, but at an attractive share price.
Buffett himself is still a big shareholder in the iPhone maker, although he has sold a large part of his stake over the past couple of years. I also am attracted to the proven business model and strong economics of Apple. It has a prestigious brand, a captive audience of existing tech, software, and service users, high profit margins, and lots of proprietary technology.
At the right price, I would be happy to snap up the share. It needs to fall further for me to do that, though.
Challenges on multiple fronts
Why do I care so much about price? After all, if Apple is as strong a company as I think, does it matter?
I think the answer is a resounding ‘yes’, for two reasons.
First, although Apple is indeed a strong business, it faces multiple risks. Tariff disputes are making its complex supply chain more difficult to manage cost effectively. Competition from lower-cost Chinese competitors threatens its market share in some areas. A lack of product innovation could also hurt revenues over time.
The second reason I think price matters is because even a great business can make for a poor investment. After all, what I see as the strengths of Apple were also true at the start of the year – but the 16% decline I mentioned above means that $1,000 invested then would now show a paper loss of $160.
That is before I even take into account the possible impact of exchange rate movements over the past few months, something that can affect the return a British investor earns when buying into US stocks like Apple.
One for the watchlist
So, with an eye to maintaining what Buffett refers to as a “margin of safety”, for now at least I will not buy Apple stock.
Even given the risks, I continue to rate Apple as a top-quality company. I plan to keep an eye on the share price, in case a further fall could present me with a future buying opportunity.
