There may be rocky waters ahead for AAPL stock
As political tensions escalated, Apple (NASDAQ:AAPL) stock crashed.
Apple had sales of $378 billion in 2021. It is slightly less than South Africa, slightly higher than Denmark. Those countries did not list one-fourth of their revenue as net income. Apple did.
But as Apple has achieved the GDP of some countries, its problems have become country-sized. It has declined by 8% since the start of 2022.
Should you "buy the dip" as Morgan Stanley (NYSE:MS) recommends? This is his top choice for 2022. Or should you take something off the table, as I did last year?
A Closer Look at AAPL Stock
According to Counterpoint Research, the iPhone is once again the best-selling phone in China.
Its market share was 23% in the fourth quarter, with sales in "Greater China" increasing by 83% year-on-year.
That phrase "Greater China" carries an ominous warning. As tensions turn war in Europe, China's Xi Jinping has become increasingly aggressive towards Taiwan.
It has an independent government, but is part of "Greater China" and as it did with Hong Kong, China wants to make Taiwan into China proper.
That's a threat AAPL stock has to contend with. China is more than a market for Apple, it is also its supply chain.
I remember how enterprises waited five years for Microsoft's (NASDAQ:MSFT) Windows that worked in the 1980s because Apple couldn't supply the market at a competitive price.
Starting with the iPod in the late 1990s, China changed that equation. Cut off China and you cut off Apple's right hand.
Stress and AAPL
In the absence of a second war, Apple stock looks golden. It could deliver devices that support virtual reality as early as this year.
The low-cost iPhones and iPads are set to launch next month. Somewhere in the garage is still the Apple car.
Apple, too, amounts to good management, in the words of Charlie Munger, vice president of Berkshire Hathaway (NYSE:BRK-B).
Half of Berkshire's stock portfolio is now in Apple, which has been a 10-bagger under CEO Tim Cook. It's also on Bank of America's (NYSE:BAC) top buys list.
Apple was powerful enough to ditch Meta Platform (NASDAQ:FB) simply by changing its privacy algorithms. The change made it harder for Meta to track the behavior of its users and deliver customized ad or content pitches.
AAPL stock could also be the perfect metaverse play. No tech company knows consumers as well as Apple.
More importantly, no company has that much cash to invest. Apple had about $64 billion in cash and securities on the books at the end of December.
Operating cash flow came in approximately $47 billion in the December quarter alone. Apple's capital budget in fiscal 2021 was about $10.4 billion. In the December quarter, it spent another $2.8 billion.
Bottom-line
If China attacks Taiwan everything is going to hell. Apple stock will be the least of your worries.
But because it is now as big as many countries, Apple is now subject to geopolitical setbacks. War is unhealthy for economies and other living things. Small wars can benefit defense contractors, but big wars destroy fortunes on a global scale.
Global tensions have made Apple untenable, and rightly so. But its latest drop brought it back to levels since early December. In the last two years, it has grown by 138 percent.