Apple Inc. finds itself navigating turbulent waters in the lead-up to the highly anticipated launch of the iPhone 15. Shareholders are witnessing a rollercoaster ride in the stock market as they weigh the potential consequences of a ban on government officials in China using iPhones for work against the expected boost from the iPhone 15 launch.
In this article, we will delve deeper into the intricacies of this situation, examining the stock’s recent performance, expert opinions, and the implications of the Chinese ban.
Apple’s stock has been on a bumpy journey lately, with shares falling 2.9% to $177.56 in just two days, marking its second consecutive day of losses. Despite a solid performance throughout the year, with a 36.9% increase in shares, the stock is down approximately 10% from its peak at $196.45 on July 31.
In just a few days, Apple’s market value has plummeted by an astounding $189.8 billion, now hovering around $2.8 trillion.
The big question on investors’ minds is where Apple’s stock is headed from here. Both technical analysis and the fundamentals of the business offer insights into potential outcomes. John Roque, a senior managing director at 22V Research, suggests that Apple’s stock could drop to $150, citing historical corrections after significant gains.
While he doesn’t anticipate a repeat of the 35% fall seen in past corrections, Roque points out that the stock’s weekly upward momentum has waned since late July, potentially leading to a milder correction.
For investors who rely on fundamentals, the threat posed to Apple in China is a pivotal factor. A ban on iPhones limited to Chinese government agency employees could result in a reduction of fewer than 500,000 units, according to Daniel Ives from Wedbush.
Ives predicts the sale of around 45 million iPhones in China over the next year, driven in part by the highly anticipated iPhone 15. With a 12-month target price of $230 on Apple shares and an “Outperform” rating, Ives remains optimistic.
However, the situation could change if reports suggesting that China might broaden the ban to state company workers turn out to be true. This expansion could potentially affect millions more individuals, although the extent and enforcement of the ban remain uncertain.
Evercore ISI analysts suggest that while this could be a headline issue, its material impact on financial performance might be limited. They maintain their “Outperform” rating and a $210 price target.
China represents approximately 19% of Apple’s revenue and supports over five million jobs in the country. This substantial presence in China implies that the Chinese Communist Party may hesitate to take actions that would significantly impact Apple without risking Chinese jobs.
Neo Wang, Evercore’s China strategist, believes that any expanded iPhone ban in China might target top leaders involved in strategic planning and decision-making rather than the broader population.
Apple’s potential woes could turn into an opportunity for Huawei. The Chinese tech giant, which has struggled under U.S. sanctions, hopes to regain market share with its competitively priced Mate 60 smartphone line. A partial rebound by Huawei, even taking back 10 million units annually from iPhone sales in China, could impact Apple’s earnings per share by 11 cents in 2024.
However, if Apple were to lose the 30 million units it gained in China since the Huawei sanctions began in 2019, the hit would be a more significant 34 cents.
Apple is currently projected to deliver earnings per share of $6.46 in 2024, according to BofA Securities. As of Thursday morning, the stock traded at approximately 27 times that forecast.
If the EPS were to decrease by 34 cents to $6.12, this would imply a valuation of around $165, assuming the same price-to-earnings ratio. However, it’s crucial to note that these are rough calculations, and BofA Securities maintains a target price of $210.
As Apple’s iPhone 15 launch approaches, the tech giant faces uncertainty driven by a potential Chinese ban on government officials using iPhones for work. While stock performance has been turbulent, experts’ opinions vary on the impact of this ban.
Investors will eagerly await the outcome of this situation, hoping that Apple’s latest flagship product can provide the boost needed to weather the storm. In the ever-evolving landscape of technology and geopolitics, only time will tell how Apple’s journey unfolds.