Tech investors are gritting their teeth wondering is the media nightmare of a brewing China Trade War going to torpedo upside potential for Wall Street giants?
For Apple Inc. (NASDAQ:AAPL) shareholders, and enthusiasts betting on “FANG” stocks – Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc (NASDAQ:GOOGL), GBH Insights analyst Daniel Ives is out sharing a reassuring perspective on China’s impact to tech. To put it bluntly, these “worries [are] overdone despite scary headlines,” says Ives.
True, the last weeks have seen apprehensions climbing, circling tariffs on aluminum and steel. Specifically, market whispers have been in an uproar that stocks could really feel the heat of President Trump renegotiating the North America Free Trade Agreement (NAFTA). Yet, as far as Ives assesses the bigger picture, tech investors care most about the China factor of it all, plain and simple.
Ives contends, “Trade war fears and increasing rhetoric from the Trump administration around $60 billion of tariffs on Chinese imports including technology and telecom products is a scary headline that ultimately will have minimal financial impact to Apple, FANG, and other tech names despite retaliation worries in our opinion. Given the tightly woven integration between Apple and Foxconn in China, we believe there is minimal risk to this relationship, cost increases, and backlash to Apple selling its iPhone devices within China (domestic competition remains a lingering worry), which is a key market opportunity for Apple over the coming years. We continue to strongly believe that given the primarily services nature of traditional FANG names and very internationally distributed from a revenue perspective, that Facebook, Amazon, Netflix, and Google/Alphabet are ‘primarily insulated’ from tariff worries and a potential retaliatory trade war with China.”
Bottom line- this analyst recommends to buy on both Apple as well as FANG “brethren” as China trade war fears weaken the tech sector. In the grander scheme, the analyst recognizes an overpowering “trifecta” at play that will generate stronger multiple to earnings expansion into the next year to year and a half: strong fundamentals, positive consumer and IT spending backdrop, and repatriation tailwinds.