Since towards the end of last year, Apple (AAPL) investors, analysts and management have had their eyes on China. China had been growing at surging speeds, but began to show signs of deceleration, which is turning out to be a challenge for Apple. At the beginning of the year, CEO Tim Cook wrote in a letter to shareholders that Apple expected a large drop in iPhone unit sales as a result of a weaker China.
This is for sure concerning, but Wedbush analyst Daniel Ives believes this is more an Apple pricing issue, and not one of China as an economy. As a result, the analyst believes Apple has control over the challenge and maintains his Outperform rating and $200 price target, which implies about 12% upside from current levels. (To watch Ives’ track record, click here)
The next few weeks are important for tech investors, Ives says. China and the US are expected to reach a broad agreement in the coming weeks, but the analyst believes, “trepidation among tech investors around these continued China trade talks are around any speed bumps that could derail [an agreement]…or a less than stellar deal, which in our opinion remains the biggest risk for tech stocks over the coming months as fundamentals continue to generally track in the right direction despite fears.”
In the near term, Ives believes two countries will continue to have “closer cooperation and negotiations around the growing IP theft issue [which] is a potential long term positive for US tech vendors with a focus on curtailing the hundreds of billions of dollars lost annually by US companies around hacking espionage and nation state attacks is long overdue and a major step in the right direction especially on the cyber security front.” Focusing on Apple, the analyst says, “given the company’s high exposure to China from both a demand and supply chain perspective with its flagship Foxconn factory front and center and the iPhone demand doldrums seen in the December quarter/March guidance, all eyes will be on China as more supply chain data emerges over the coming weeks.”
Apple used to be a no-brainer for investors. The tech giant had been the world’s most valuable company for much of the decade, before stumbling and passing the torch to Microsoft. Nevertheless, the Wall Street community is optimistic on the stock; TipRanks analysis of 36 analysts shows a Moderate Buy rating, with an even split of 18 Buys and Holds. There is an average price target of $177.37, representing a 3% rise from current levels. (Get TipRanks’ free stock analysis report on AAPL)