Apple Inc analysts broadly shrugged off a report that the company was banned from selling some older models of its iPhones in China following a lawsuit, saying the issue was a headline risk — not a factor that fundamentally changes the company’s prospects in the country.
The stock initially fell as much as 3.1 per cent, but recovered to briefly trade higher on the day and avoid extending the recent 30 per cent decline in shares seen since hitting a record in early October. NOTE: Apple Analysts Are Sounding a Historically Rare Note of Caution. Here’s what analysts are saying:
Morgan Stanley ( Katy Huberty)
“This injunction initially appears limited in its scope,” as it only applies to phones with the iOS11 operating system. “Currently, 70 per cent of Apple’s device installed base operates iOS12 (21 per cent operates iOS11 and 9 per cent operate an older OS) and, more importantly, all devices are currently sold with iOS12.” Despite that, the ruling “does add to greater headline risk for the stock and we need to monitor any impact on consumer demand for Apple products in China, which is already weak.” Affirms overweight rating, PT $236.
Wells Fargo ( Aaron Rakers)
“While we think that Apple could continue to face headline risk in its battle with Qualcomm, it appears that Apple will be largely unaffected by the ruling.” Keeps at a market perform rating, PT $210, writing that “we continue to think there is risk to Apple from the developing US-China trade war.”
Wedbush ( Daniel Ives)
“While the headlines are concerning regarding this latest China court ruling we believe the models involved are related to 10%-15% of sales potentially impacted in the region related to older versions.” However, China is a “linchpin of growth for Apple,” and “any further dent in the armor at this juncture is not what Apple or investors wanted to see given the headwinds around sales of its latest XR model.”
Writes that news “is more noise than a fundamental impact, although it will add to the black clouds over Cupertino until investors hear from the company in January.” Affirms outperform rating, PT $275, writing that the company’s earnings potential in 2020 “remains rock solid” and that the stock is “trading towards trough historical lows.”
RBC Capital Markets ( Amit Daryanani)
Notes that “the ruling is at a provincial court, so AAPL will likely move to the higher courts to get the injunction halted.” Calls the news “an incremental headline negative for AAPL,” but writes that “the logical scenario remains the two parties end up settling their dispute away from the courts.” Rates outperform, PT $235.