Apple’s China syndrome: What the analysts are saying

The sell-side analysts are (mostly) trying to stay upbeat.

Brian White, Cantor Fitzgerald: Overblown China Concerns and Market Malaise Creates Irrational Valuation. Growing fears regarding China have taken Apple’s stock to what we view as severely depressed valuation levels… Given our view on the longevity of this larger iPhone cycle, the ramp of Apple Watch, new expansion opportunities across China, emerging opportunities in India, increasingly challenged competitors, relatively modest market share and an ever strengthening global brand, we highly doubt even a global recession would drive our CY:16 EPS projections to come in 50% below our projections. Reiterate Buy. Price target: $195

Keith Bachman, BMO: Trying to find a bottom. If we assume that 1) our current estimates for AAPL are reasonable, and 2) AAPL reaches trough multiples for NTM P/E, relative P/E, and FCF, then the average of our noted trough multiples would suggest a value of about $99. Hence, we believe that investors are already assuming that AAPL estimates move lower over the next few quarters. Outperform. $145.

Daniel Ives, FBR: Thoughts on Apple (and the Baby) Being Thrown Out with the Bath Water. It has been a miserable, dark period for Apple investors since the company reported June results, as shares are down 25% with negative China sentiment, market fears running rampant, and worries about iPhone 6 growth waning. With panic running wild about China the last few weeks/this morning, many on the Street are now worried that Apple’s growth story is in the rear-view mirror and darks days are ahead. While we acknowledge this “white knuckle” period for Apple (and its investors), (1) with less than 30% of its customers upgrading to iPhone 6 to date, (2) a major product cycle ahead with the launch of 6s (September 9), (3) the China market representing a $100 billion market opportunity for over the next three years (taking a 30% haircut to our estimate) and (4) trading at 8x ex-cash, we believe that Apple is a uniquely compelling name to buy in this hurricane-like market downdraft this morning. In our opinion, Cook & Co. are about to embark on their next phase of strong growth on an iPhone 6/6s product super- cycle and a host of new product categories paving the way for this next chapter of growth into FY16/ FY17. We maintain our Outperform rating. Price target: $175

Aaron Rackers, Stifel: Apple Talking Points – China Metrics. While it is clearly hard to fight the forward-looking negativity surrounding the China exposure weighing on shares of Apple (AAPL: $104.21) currently, we thought it would be useful to highlight the following talking points… 1) At $13.2 billion in revenue during Apple’s June ’15 quarter (+112% y/y), Greater China accounted for 26.7% of Apple’s total revenue. 2) While our tracking of mobile phone exports out of China shows July data up 5.5% y/y and units as being roughly flat y/y, we would note that mobile phone exports coming out of the Henan Province (the largest province in terms of Apple iPhone production) were up more than 70% y/y. 3) In terms of internal smartphone adoption in China, we highlight our prior reports that Mainland China smartphone shipments stood at 38.9 million in July, up 10% y/y. Within this, we find that reported Android smartphone shipments were roughly flat y/y, leaving non-Android shipments at an implied +167% y/y. Buy. $150.

Trip Chowdhry, Global Equities: Slowing China economy is disastrous for Apple’s Business. We are estimating that China’s GDP will decline to minus 2% from current growth of between positive 5% and 7%—similar to the the decline of -2% in US GDP in 2009 over 2008. Declining China GDP of -2% would be disastrous to Apple’s China Business, as shown in our new estimates. Reducing Apple’s China Revenue estimates by 8%. Reducing price target to $155 from $176.

Timothy Arcuri, Cowan: iPhone builds tracking down. We continue to receive MAJOR pushback for our field checks indicating initial 6S/6S+ builds are DOWN for the first time in the iPhone cycle, but we remain steadfast in our view that total builds are 85-90MM w/builds having just begun. Force Touch remains the key new feature (ported from Apple Watch) but haptic motor supply is very tight regardless of supplier (AAC or NIDEC). Checks also indicate there will be still be no Sapphire display. Market perform. $130.

More as they come in.

Follow Philip Elmer-DeWitt on Twitter at @philiped. Read his Apple (AAPL) coverage at or subscribe via his RSS feed.

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