Earlier this week, the Fuzhou Intermediate Court in China granted two preliminary injunctions against Apple (AAPL) that is supposed to ban the tech company from selling any iPhone model since the release of the iPhone 6s and before the later models (the X, XR and XS.) The cause of this ban? It is a request coming from competing tech company, Qualcomm, which claims Apple stole patents from them. The contested patents have been brought up through the many years of AAPL/QCOM quarreling and target the features that enable users to adjust and reformat the size of likes of pictures as well as manage applications using the touchscreen. Despite the ban, media outlets in the area are reporting that the phones are still being shown off in Chinese Apple stores.
Wedbush analyst Daniel Ives says the risk/reward factor at play is compelling enough for him to maintain his Outperform rating with a price target of $275, which shows a potential upside of around $60. (To watch Ives’s track record, click here)
“While the headlines remain noisy regarding this latest China court ruling and Qualcomm’s latest actions, we believe the models involved are related to only 10%-15% of sales potentially impacted in the region as they are older versions. According to Apple’s original statement, there should be no disruption to the models Chinese consumers can purchase, although this remains up in the air given the ongoing legal battle. In a nutshell, with China being a linchpin of growth for Apple around iPhone sales any further dent in the armor at this juncture is not what Apple or investors want to see given the headwinds around sales of its latest XR model, which has weighed on shares over the past month,” Ives said.
In addition to the patent issues, Huawei’s CFO, Meng Wanzhou was arrested at Vancouver Airport on December 1st in Canada. The order for her arrest, coming from the U.S. Department of Justice, alleges Wanzhou was using a shell company to cover for Huawei in order to do business with Iran, which is in violation of current U.S. sanctions against the Arab nation. Investors fear that this event will only inflame the current trade war between the U.S. and China, as Cupertino relies on Asia for much of its sales.
Nevertheless, the analyst remains bullish. Ives believes with AAPL having 350 million iPhones ready for upgrade in the next 12 to 18 months – the company is still in good shape, even though 60 to 70 million of those phones are located in China (which is why investors are “hyper sensitive,” as Ives puts it).
Overall, the word on the Street rings largely bullish on the iPhone maker, with TipRanks analytics demonstrating AAPL as a Buy. Out of 33 analysts polled in the last 3 months, 17 are bullish on Apple stock, 15 remain sidelined, and only 1 is bearish on the stock. With a return potential of nearly 30%, the stock’s consensus target price stands at $223.76. (See AAPL’s price targets and analyst ratings on TipRanks)