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Apple Stock is Down 20% – Time to Buy?

As part of a sell-off in tech stocks in the first weeks of September, Appleit’s (AAPL 2.37% ) the market capitalization has discreetly taken a discount of 500 billion dollars. While stocks appeared to bottom on Monday when the stock rose 3%, the tech giant’s stock is still down a notable 20% from the Sept. 1 intraday high.

With a fifth of Apple’s stock value eroding in less than a month, is this a good buying opportunity? Or is there merit in the much lower share price?

Image source: Getty Images.

Key catalysts

After a 20% selloff, Apple stock is definitely worth a closer look. the technology company recently fired on all cylinders, delivering a quarter of double-digit revenue and bottom line growth during a pandemic.

During Apple’s third quarter of fiscal 2020, which ended June 27, the tech company managed to grow revenue across all product segments and regions. The strong growth captured the incredible resilience of the business; Apple suffered numerous store closures during the period, but demand remained robust. Fiscal third quarter total revenue increased 11% year-over-year and earnings per share jumped 18%marking a record June quarter for the company.

While Apple’s broad-based momentum in the fiscal third quarter was remarkable, some specific catalysts on the horizon for Apple are worth pointing out.

First, there’s the upcoming launch of new iPhone models. New versions of Apple’s popular smartphones are expected to debut in October. Accounting for more than half of Apple’s revenue, the new devices could drive the tech company’s business forward. Many analysts expect the new iPhones to feature 5G connectivity, a potential key selling point for the segment.

Then there’s Apple’s fast-growing wearables and services business. Services revenue for the last 12 months was up 19% year-on-year. Last 12 months wearables, home and accessories revenue grew 32% over the same period. Together, these two segments represent approximately 30% of Apple’s revenue, encapsulating a significant long-term growth opportunity for the company.

Apple stock: buy, sell or hold?

With momentum like this, Apple is a stock worth owning. But is it a buy at the level it is at today?

A person analyzing charts on a laptop.

Image source: Getty Images.

Unfortunately, Apple’s current valuation is still very expensive, even after the stock pullback. The company trades at more than 33 times earnings. But the Apple stock arguably deserves a frothy assessment. The tech giant consistently demonstrates competitive advantages in a variety of ways, including its loyal customer base, constant product innovation, pricing power, and brand recognition.

So, is Apple stock a buy, sell or hold? I would say the stocks are worth buying after they are 20% off. Investors, however, should expect significant volatility and should not buy stocks unless they plan to hold them for five years or more. Although stocks are down 20% from recent highs, they are still up more than 100% in the past year. It wouldn’t be surprising to see stocks sell off even more as some investors take their profits.

Investors, of course, should be aware of the risks involved in buying individual stocks. There’s always a chance that the competition will be tougher than expected, or that Apple will run into unforeseen challenges specific to a company or a broader market. In the long run, however, it looks like a solid entry point into a big market leader.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.