China’s Singles Day, which officially takes place on November 11th but has become a weeks-long shopping extravaganza, is the world’s biggest online shopping event. It’s an opportunity for many consumers to purchase products at seriously discounted prices and for companies to make bank.
But it looks like this year’s event has thrown up some numbers that might be concerning for the world’s biggest company – Apple (NASDAQ:AAPL).
According to a Reuters story published last week, market research firm Counterpoint provided growth rate estimates for the period between October 30 and November 12, showing that Huawei experienced a 60% increase in smartphone sales, Xiaomi saw a 28% rise, and Apple witnessed a 4% drop.
With investors already concerned about Huawei eating away at Apple’s iPhone sales, that does not sound very promising. Nevertheless, Evercore’s Amit Daryanani, a 5-star analyst rated in the top 2% of the Street’s stock pros, remains unfazed and believes that the perceived risk is being exaggerated.
“It is important to note that Huawei is growing off a much smaller base, which makes it easier to deliver higher percentage gains,” Daryanani went on to explain. “In addition, both Huawei and Xiaomi offer lower end smartphones, so looking at units can be misleading as it is unclear how much of this growth came at the lower end of the market (Apple China ASP at $1k vs Huawei at $600 and Xiaomi at $200).”
By offering discounts and promotions, Huawei and Xiaomi also adopted a more aggressive approach, while Apple refrains from such strategies. Moreover, Apple’s 4% decline can likely be attributed to supply constraints on the iPhone rather than a significant loss in market share. While Daryanani does not have access to weekly sales data for the China smartphone market, IDC’s 3Q23 estimates suggest Apple managed to add approximately 200 basis points of market share in China, despite worries about the latest premium Huawei phone.
“Net/net,” Daryanani summed up, “We do not think the Singles Day sales estimates should drive any meaningful change in how investors think about Huawei risk. Worse Case: if Apple’s market share in China retraces back to its 2019 level it would represent a $23.6B revenue headwind (~6% of FY23 revenue) and a ~5% earnings headwind – a scenario we think is improbable.”
To this end, Daryanani maintained an Outperform (i.e., Buy) rating on Apple shares, backed by a $210 target. There’s potential upside of 10.5% from current levels. (To watch Daryanani’s track record, click here)
Overall, the bulls are running for Apple. The stock has 33 recent analyst reviews, with a 25 to 8 breakdown favoring the Buys over the Holds. Therefore, the message is clear: AAPL is a Strong Buy. The average target currently stands at $201.99, implying shares will post modest growth of 6% over the coming year. (See Apple stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
