Apple’s (NASDAQ:AAPL) December quarter (F1Q23) was marred by the disruptions to iPhone production in China, but how is the tech giant faring in the region now the headwinds have abated, and the Chinese New Year (CNY) is out of the way?
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According to channel checks made by Barclays’ Tim Long, not all that great. “Overall consumption data was tepid out of CNY, suggesting Chinese consumers are still weak against an iffy macro backdrop,” the 5-star analyst said. “Overall, we believe China reopening should benefit travel and entertainment first, not electronics/goods, which has been the sentiment we picked up from checks with folks on the ground. Heightened inflation along with China reopening could also dampen consumer demand for electronics.”
Beginning this week and running until April, there are 700+ RMB discounts (around 10%) on iPhone 14 pro models at all major AAPL authorized stores/resellers. This represents the second round of major discounts in recent times following last November’s Singles Day promotion. While Apple would normally wait until the June 18 Festival to kickstart a promotional campaign, the fact it is making “bigger-sized and earlier discounts,” might be suggestive of weaker demand.
Going by the iPhone data, China January iPhones sales showed MSD (mid-single digit) growth with this year’s January Chinese New Year coming earlier than last year’s February. Looking at CNY on its own, with consumers more focused on travel and entertainment, Long reckons iPhone unit sales were down 20% year-over-year.
That said, Android sales weren’t quite as good in January, coming in “flat to down” compared to last year. Attributing the iPhone’s relative outperformance to better supply and “pent-up demand post first Covid wave/reopening,” Long does not believe the strength is sustainable, and after January, expects demand will “revert lower.”
All told, Long reiterated an Equal Weight (i.e., Neutral) rating on Apple shares, along with a $145 price target. The figure suggests the shares will drift 6% lower over the following months. (To watch Long’s track record, click here)
Long, however, is amongst a minority on Wall Street. 4 other analysts join him in the skeptic club, but countered by 24 positive reviews, the stock claims a Strong Buy consensus rating. The forecast calls for one-year returns of 12%, considering the average target clocks in at $173.04. (See Apple stock forecast on TipRanks)
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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.
