Apple ( AAPL ) stock fell more than 6% after Chinese authorities told employees in central government agencies not to use iPhones at work. A new high-end phone from China’s Huawei has put pressure on Apple, just days before the company unveils the new iPhone 15.
But Morgan Stanley analyst Eric Woodring wrote Friday that these headlines are “more bark than bite,” even as China represented about 20% of Apple’s revenue in the most recent quarter.
“Apple’s 2-day -6% move in shares suggests the market thinks the recent China headlines will translate into something broader,” Woodring wrote Friday. “We believe this is unlikely … the stock movement is overdone.”
Even in a worst-case scenario, Morgan Stanley believes Apple could lose 4% of its revenue and 3% of its earnings per share. The stock’s move earlier this week signaled that Apple would lose 70% of its iPhone shipments to China in a “very difficult and unlikely scenario,” according to Morgan Stanley.
Apple shares rose more than 1% on Friday.
Apple has been growing in China over the past several years.
According to JPMorgan’s analysis, Apple will double its market share from 2019 to the first quarter of 2023, capturing 20 percent of the Chinese market.
And that growth could be at risk, said JPMorgan analyst Samik Chatterjee.
“We do not expect restrictions on iPhone ownership by government employees to have a material impact on audio viewing because previous restrictions of a similar nature have shown limited evidence of changing consumer purchasing behavior,” Chatterjee said.
“That said, the bans are coming up against the recently launched Huawei Mate 60 Pro (ie, Huawei’s 5G smartphone), and the ban will allow Apple to continue to deliver share gains in the domestic market.”
Chatterjee also pointed out that the potential headwinds in China come at a critical time for Apple.
The stock touched summer highs, prompting talk of whether stocks were overvalued. Then, the tech giant missed Wall Street’s iPhone sales estimates and reported its third straight quarterly revenue decline in early August.
“We believe that the share price performance for the rest of the year (especially after the high performance in 1H and the low performance between July and September) is now dependent on hitting lower investor expectations for the iPhone 15 launch,” Chatterjee wrote.
Apple’s flagship fall event is scheduled for next Tuesday, with the iPhone 15 expected to be the headliner. Typically, Apple stock underperforms in the month the iPhone launches, and September is the stock market’s weakest month of the year.
And while analysts note that there aren’t many “materials” expected for the iPhone 15, Apple users may benefit from upgrading their existing iPhones.
JPMorgan estimates Apple will sell 218 million iPhones from September through the end of the year, six million fewer than last year’s total.
“Historically, an iPhone launch is a sell-the-news event,” writes Morgan Stanley Woodring.
“While we don’t expect this year’s response to the spectacular Stock Day event on September 12 to be any different this year, we continue to believe that FY24 iPhone expectations are too low and the iPhone 15 cycle is not as ‘fluctuating.” [average selling price] Progress.”
Josh Shafer is a Yahoo Finance reporter.
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