Is the APLY ETF a better alternative as Apple stock price crumbles?

Apple (NASDAQ: AAPL) stock price is in trouble as concerns about the company’s growth in key markets and segments remain. It crumbled to a low of $170 on Tuesday, its lowest point since November last year. It has moved into a correction zone after falling by over 14% from its highest point in December.

Apple is facing substantial headwinds

Apple has always traded at a premium but there are concerns about whether it deserves this valuation. Data compiled by SeekingAlpha shows that the company has a TTM PE multiple of 27.15 and a forward multiple of 26. 

Apple’s revenue growth has been under pressure recently. The most recent results showed that the company’s revenue contracted by 0.47% YoY. Its forward revenue stands at 1.54%, lower than the sector median at 6.70%.

The company is facing a mountain of challenges. Data released this week showed that iPhone sales in China have tumbled hard recently. This trend will likely continue in the coming years now that most people are staying with their iPhones for longer. 

This is an important issue since the iPhone is the company’s biggest cash cow, generating over 50% of its total revenue. On Tuesday, Foxconn, a key Apple supply reported weak financial results for the last quarter.

At the same time, there are signs that Apple’s services revenue is slowing and facing headwinds. Recently, the company received a big fine from European regulators, who accused it for stifling competition in the music-streaming industry.

Apple stock has also crashed because the company has lagged behind other companies in the artificial intelligence (AI) industry. It has now ended its Titan electric vehicle (EV) project as it shifts its focus in the AI industry.

Apple’s technicals are also not doing well. The stock has formed what looks like a double-top pattern around $197.25. This pattern is one of the most bearish signs in the market.

It has dropped below the 200-day and EMA and the 200-day Arnaud Legoux Moving Average (ALMA). It is also nearing the neckline of the double-top pattern at $165.33. The stock has moved to the 38.2% retracement point.

Therefore, the outlook for the stock is bearish, with the next target being at 50% retracement point at $160.

Apple stock chart

Is APLY ETF a good alternative?

The YieldMax AAPL Option Income Strategy (APLY) ETF has also been in a strong bearish trend and has underperformed Apple shares. 

APLY is a fund that is similar to TSLY ETF, which I wrote about recently. Its goal is to give investors exposure to Apple and provide them with regular dividends.

It does that by investing in Apple derivatives and then selling call options. A call option is a financial transaction that gives investors the right but not the obligation to buy an asset.

Selling the call option gives the ETF a premium, which it distributes to investors. It then benefits when the Apple stock is rising. APLY has a dividend yield of over 28%, higher than Apple’s yield of 0.55%.

On paper, it makes sense to invest in APLY ETF during bear markets since the call option gives it a premium to distribute. In reality, however, APLY tends to underperform AAPL. It has dropped by 13% in 2024 while Apple is down by 11.5%. Therefore, from a fundamental and technical standpoint, I agree with analysts at Evercore who recently removed Apple from their conviction list.