Apple Inc. AAPL is experiencing a massive market downturn as investors grow increasingly concerned about its exposure to newly announced tariffs targeting China, Vietnam, and India — all key components of Apple’s global supply chain.

Biggest Stock Decline Since 2001

Apple shares have plummeted 19% since the announcement of new tariffs last week, marking the company’s worst three-day performance since 2001, as quoted on Bloomberg. The massive selloff wiped out more than $637 billion in market value and triggered a surge in volatility, as measured by the CBOE Apple VIX.

The tariff dilemma leaves Apple stuck between hiking prices and shrinking profits — a no-win scenario for the company. The pressure intensified after China responded to U.S. tariffs with retaliatory measures, prompting the White House to threaten an additional 50% tariff hike.

Uncertainty Clouds Apple’s Near-Term Outlook

Analysts and investors are now focused on how the tariffs and a potential slowdown in Apple’s growth markets could impact the company’s financial health. Although the Apple stock showed slight gains in Tuesday’s premarket trading, experts remain cautious.

Any Silver Lining?

Despite current challenges, Apple’s robust cash flow, strong balance sheet, and aggressive share buyback program have traditionally made it a safe bet for investors. However, those strengths are currently being overshadowed by tariff-related risks.

The CBOE Apple VIX has surged to levels not seen since September 2020, reflecting heightened concern. Still, many analysts remain optimistic, noting the potential for a rebound. The stock’s 14-day Relative Strength Index (RSI) has dropped below 23, signaling deeply oversold conditions not seen in over a decade, as quoted on Bloomberg.

Valuation Looks Decent, But Further Downside Risk Remains

At roughly 23.5 times forward earnings, Apple’s valuation is at its lowest point in over two years. Although this is still slightly above the 10-year average, some investors view it as an entry point.

Apple shares have been trading at a price-to-free-cash-flow ratio of 27.97x, down from a five-year high of 38.60x. The multiple hit a low of 17.59x in 2020.

Apple’s price-to-sales ratio stands at 6.71x, down from a five-year high of 9.44x, while it’s a five-year low is 4.37x.

In a nutshell, Apple shares have priced in a lot of risks and corrected valuation concerns amid the ongoing tariff turmoil. However, if tensions persist, there is still room for further decline, as the stock has traded at even cheaper valuations over the past five years.

Tariff Resolution Could Trigger a Relief Rally

The biggest issue for Apple remains the tariff situation. If the company secures exemptions — as it did during Trump’s previous term — it could trigger a strong recovery in the stock. On the flip side, escalating trade war could further complicate the situation for Apple.

Apple-Heavy ETFs in Focus

Investors encouraged by Apple’s valuation correction may consider buying the dip in Apple stock. Investors should note that exposure can be gained through Apple-heavy exchange-traded funds (ETFs) like iShares Global Tech ETF IXN, Vanguard Information Technology ETF VGT, Fidelity MSCI Information Technology Index ETF FTEC, iShares U.S. Technology ETF (IYW), and Technology Select Sector SPDR Fund XLK. The basket approach minimizes the company-specific concentration risks.

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Apple Inc. (AAPL) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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