Apple (NASDAQ:AAPL) CEO Tim Cook opened the company’s first retail store in Mumbai, India, on Tuesday and is scheduled to open the second one in the country’s capital Delhi on Thursday. India is expected to emerge as a key market for Apple, as the company looks to diversify its supply chain beyond China.
Apple’s Growing Focus on India
Apple faced significant production disruption in China due to the COVID-19 resurgence and worker unrest at key supplier Foxconn’s factory due to the country’s stringent COVID restrictions. These headwinds and the political tensions between U.S. and China emphasized the need for Apple to diversify its supply chain beyond China.
During the fiscal first-quarter earnings call held in February, CEO Cook called India a “hugely exciting market” and “a major focus.” As per Bloomberg, Apple’s revenue from the Indian market jumped about 50% to nearly $6 billion in the year through March 2023. While that represents less than 2% of Apple’s overall revenue, the growth rate looks promising.
The country’s massive population and expanding middle class make it an attractive market for the iPhone maker. Apple tripled its iPhone production in India to over $7 billion in the previous fiscal year, reflecting the company’s strategy to bring down its dependence on China. However, India’s high import duties and abrupt changes in regulations are potential risks that must be considered.
Is Apple Stock a Good Buy?
Analysts seem to be bullish about Apple’s expansion into India. Wedbush analyst Daniel Ives, who has a Buy rating on AAPL stock, sees the company’s focus on India from a production and retail expansion point of view as a “strategic poker move” that could boost its top line from the Asian country to $20 billion by 2025.
While Apple currently holds less than 10% share of the Indian smartphone market, Ives believes that the company’s “unmatched” brand and marketing would likely drive additional growth, especially as it is gearing up to launch the iPhone 15 later this year.
On Tuesday, CFRA analyst Angelo Zino reaffirmed a Buy rating on Apple, saying, “We view India as a similar opportunity to China 15 years ago and see a greater retail footprint along with the natural wealth effect over time supporting higher revenue (volume/ASPs [average selling price]) in the region.”
Overall, Wall Street has a Strong Buy consensus rating on Apple based on 22 Buys, five Holds, and one Sell. The average price target of $171.08 suggests 3.5% upside. Shares have rallied 28% so far in 2023.
While the Indian smartphone market is currently dominated by players like Samsung, Xiaomi, and Vivo, Apple sees tremendous growth opportunities over the long term, given a large potential customer base.