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Not every Wall Street firm is sour on
prospects in China.
Influential analyst Katy Huberty of
says there are “early signs of iPhone stabilizing in China.”
Cuts in iPhone XR prices and a more steady supply chain helped Apple (ticker: AAPL) gain market share in the region in January and February, year over year, after slippage in the fourth quarter of 2018, Huberty wrote. Reduced prices on the iPhone XS and iPhone XS Max could further improve demand in March, she added.
Her note on Wednesday, which maintains an Overweight rating on Apple shares with a price target of $197, is a far cry from a December 2018 note that cited smartphone weakness in the China market. Apple’s share of smartphone sales in China remained at 9% in 2018, the same as in 2017, according to Morgan Stanley.
Morgan Stanley research indicates that February was the first time in a half-year that its Asian team didn’t revise iPhone sales projections lower. The firm is forecasting sales of 180 million iPhones in Apple’s fiscal 2019.
This should soothe Apple investors, who have seen their share of concerned research notes on China in recent weeks after Apple CEO Tim Cook acknowledged problems in the region earlier this year. Reports from
and Longbow Research this week noted softening iPhone sales in China, a region that accounted for about 20% of Apple’s fiscal-2018 revenue.
While Morgan Stanley is more bullish on Apple’s China outlook, another research firm is concerned about
(SPOT) antitrust complaint filed with the European Commission on Monday. The complaint said Apple’s App Store’s rules “limit choice and stifle innovation at the expense of user experience.”
“With growing calls for more-robust regulation, we continue to view App Store pricing as an area that could see more pressure,” Macquarie Research analyst Benjamin Schachter wrote in a note on Wednesday. “As a reminder, we believe that the traditional 30% commission rate charged by AAPL and GOOG is under pressure from three areas: 1) regulatory, 2) legal, and 3) competitive.”
If the App Store commission structure is lowered to 12%, to 20%, for example, Macquarie’s forecast for Apple’s fiscal-2020 earnings before interest and taxes would fall seven percentage points to 15%.
Nonetheless, Macquarie maintained its Neutral rating on Apple shares, with a price target of $149, which would be an 18% reduction from its Wednesday closing price of $181.71.
Apple stock was up 1% in late-morning trading on Thursday to $183.63. The company is expected to announce a new video-streaming service and revamped Apple News during a March 25 event in Cupertino, Calif.
Write toJon Swartz at [email protected]