Apple stock falls to key support ahead of foldable iPhone launch: buy the dip?

Apple stock has pulled back over the past few days as investors turn their attention to the company's upcoming event, where it is expected to unveil its foldable phone. AAPL fell to $316, down 4.50% from this month's high and 8.35% from its yearly high, while the options market signals more volatility ahead.

Apple to unveil its first foldable phone

Apple stock will be in the spotlight this week as investors react to the upcoming launch of its first foldable device. This is a major development since other companies like Huawei and Samsung have already launched their foldable phone known as Duo. 

It is also a major development because it will be the biggest launch that Apple has made in the past decade. Analysts believe that it will make Apple billions of dollars in the next financial year.

Apple also plans to launch the new iPhone 18 and iPhone 18 Pro at the event. It will also unveil its new Watch series, marking the first major product launch under CEO John Ternus, who took over from Tim Cook.

The new iPhone models will likely struggle to match the strong performance of the previous generation, since they are expected to look similar to their predecessors. This marks a shift from last year, when the iPhone 17 stood out as a significant redesign from the iPhone 16.

Apple’s business is doing well

The most recent results showed Apple’s revenue jumped to $109 billion in the second quarter, up from $94 billion. This revenue was driven by the strong performance of its products division, which made over $78 billion in revenue. Its services segment made over $30 billion.

For the first nine months, the company made over $364 billion in revenue and $101 billion in profits. These numbers make it one of the most profitable companies in the US.

Analysts predict that Apple’s growth will continue in the foreseeable future. This quarter’s revenue is expected to jump by 10%, while the annual figure will come in at $477 billion, up by 14.8%. Apple has a long record of beating expectations, meaning its actual revenue will be over $480 billion. 

The main concern, however, is that data shows that the company is highly overvalued, with the forward price-to-earnings ratio rising to 35, higher than the five-year average of 29. Apple will now need to deliver stronger results to justify its valuation. This is possible if the new foldable phone becomes a bigger success than those made by other companies. Another risk is that it faces higher memory costs.

Apple stock technical analysis

AAPL stock chart | Source: TradingView

The daily chart shows that the AAPL stock has rebounded in the past few weeks, moving from a low of $299 in August to the current $316. It formed an ascending channel and is now in the lower side. 

The stock nearly completed filling the fair value gap that formed on July 31st when it released its earnings. Therefore, with the stock being near the lower side of the channel, chances are that it will rebound to the upper side of the channel. However, there is a risk that the stock will drop towards the support level of $300.