Morgan Stanley: Apple investors shouldn’t worry too much about China

“China could present some short-term issues for Apple investors — but it shouldn’t worry them too much, according to new research,” David Marino-Nachison reports for Barron’s. “China is a crucial market for Apple’s business. In the quarter ended June 30, for example, it accounted for nearly 18% of sales and 27% of operating income. And recent economic and regulatory issues there, Morgan Stanley’s Katy Huberty wrote Wednesday, could hit the company’s services business with China, the most important market for the App Store.”

“U.S.-China trade tensions continue to concern investors, along with questions about the prospects for economic growth there,” Marino-Nachison reports. “This isn’t a time to panic, according to Huberty, who has an Outperform rating and a $247 price target on Apple’s stock, about 13% above current levels.”

“China, she wrote, presents ‘a near-term overhang, but we see limited downside to near-term estimates and remain bullish on the long term sustainability of services growth,'” Marino-Nachison reports. “On the hardware front, meanwhile, Emily Bary recently covered the notion that Apple’s latest phones might perform well in China, which should generally boost the services business.”

Read more in the full article here.

MacDailyNews Take: Tim Cook has said as much, too.

I’m cognizant that in both the U.S. and China, there have been cases where everyone hasn’t benefited, where the benefit hasn’t been balanced. My belief is that one plus one equals three. The pie gets larger, working together. — Apple CEO Tim Cook, March 24, 2018

SEE ALSO:
David Rubenstein: US-China trade dispute is a ‘skirmish, not a war’ – October 9, 2018
Trump administration to spare some Apple products including Apple Watch, AirPods, and HomePod from latest China tariffs – September 17, 2018
China’s stock markets down as President Trump said to ready new tariffs – September 17, 2018
Cramer: Here’s why China won’t boycott Apple as part of its trade war with the US – August 7, 2018
Apple could be used as a ‘bargaining chip’ in the trade war, Chinese state-run media warns – August 7, 2018
Why the US-China trade war may not have much impact on Apple – July 17, 2018
Apple launches $300 million China Clean Energy Fund – July 13, 2018
What trade war? Markets shrug off US-China dueling tariffs – July 6, 2018
U.S. President Trump puts tech in trade war crosshairs with planned curb on China investment – June 25, 2018
The Trump administration told Apple it would not place tariffs on iPhones assembled in China – June 19, 2018
Chinese stocks end at 2-year low, Apple suppliers sink on trade-war concerns – June 19, 2018
Why Apple CEO Tim Cook is acting like tech’s top diplomat – June 18, 2018
Apple CEO Tim Cook doesn’t expect a full-blown trade war between the U.S. and China – June 5, 2018
President Trump and Apple CEO Cook meet at White House with trade the focus – April 25, 2018
Apple CEO Cook to meet with President Trump – April 25, 2018
Why Apple stock can withstand a Chinese trade war – April 5, 2018

Apple CEO Tim Cook heads to China as President Trump orders 25 percent tariffs on up to $60 billion in Chinese imports – March 23, 2018
BoA Merrill Lynch: Apple is prepping a ‘foldable’ iPhone; U.S. and China trade tensions not an issue for Apple – March 23, 2018
Designed in California. Assembled in China. How Apple’s iPhone skews U.S. trade deficit – March 21, 2018
President Trump blocks Broadcom-Qualcomm deal over China concerns – March 13, 2018
Elon Musk sides with President Trump on trade with China – March 8, 2018
Analyst: President Trump’s tariff impact on Apple would be just a ’rounding error’ – March 7, 2018

4 Comments

  1. Yes, Apple investors worry about everything Apple does or doesn’t do. They’re nothing like Amazon or Netflix investors. Every company with a high P/E of 150 can feel confident that investors stand firmly behind them and aren’t likely to dump the stock on rumors. Apple might be a trillion-dollar company but with a P/E of 19 or 20, you just know most of those investors don’t have much confidence in Apple. They mostly believe Apple’s growth story is gone and there’s no product to replace the iPhone or even come close to it. Add to it the fears of global smartphone saturation and POTUS’s China tariffs, and you’ve got a bunch of scaredy-cat investors who would like to turn and run on any negative news or rumor.

    Why wait until the holidays when their fears are rampant now? Of course, the entire market is down and Apple is no worse than most tech stocks that have dropped over the last week or so. I have no idea how many new iPhones have been sold but I’m sure the ASPs are going to be quite high. As an Apple shareholder, I’m willing to wait for the end of the quarter to see how sales are and continue collecting my dividends. I feel certain Warren Buffett isn’t about to panic and he’s got plenty of skin in the Apple game.

    1. I do not believe that it is accurate to conflate a high P/E ratio with investor confidence. The P/E ratio has much more to do with hope/expectations for growth going forward.

      If you are an investor in a high P/E stock, then there likely a good bit of fear mixed in with that hope/confidence. Because the high P/E makes the stock volatile in both directions. In my experience, a high P/E is associated with momentum investing in which people pile on and drive the stock price up. It is like a game of chicken in which every investor is hoping to bail out near the peak, just before everything collapses. Larger and more savvy investors have an advantage, of course, in using tools like options to mitigate the downside risk.

      Actually, the fact that Apple’s P/E is around 20 is rather amazing to me. In general terms, that means that the market is anticipating growth on the order of 20% going forwards, which is quite healthy for any company, particularly one as large as Apple.

    1. That kind of post undermines your cause, tball. It takes you down to the mindless level of the opposition in which sound bites deliver “truth” and “facts” are more a matter of opinion and convenience.

      Stick to the facts – the widespread corruption in the Administration, the lies, the coverups, the complicity of the GOP Congress – and you will have much better success at changing the course of this country going forward.

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