Apple Shares Have Near-Term Floor at $160, Morgan Stanley Says

(Bloomberg) -- Apple Inc. shares, which have fallen about 7% since the U.S. made moves to curb Huawei Technologies Co. earlier this month, have a near-term floor at $160, about 10% below Wednesday’s closing price, according to analysts at Morgan Stanley.

“We expect shares to remain choppy,” analysts led by Katy L. Huberty wrote in a note. “Near term, the greatest risk to Apple is that Chinese consumers meaningfully slow their purchases of Apple products, which would likely cause another round of estimate cuts.”

The analysts estimate that the iPhone giant could see a 23% hit to fiscal 2020 earnings in a worst-case scenario of the U.S. placing a blanket 25% tax on all Chinese imports. A profit reduction of around 19% is, however, more likely, given that Apple may raise prices to mitigate the impact, they said. Morgan Stanley doesn’t expect China to formally ban iPhone sales, given that the devices are produced in the country.

Related:Apple and Nike Brace for China’s Wrath After Huawei Ban

Analysts have been seeking to quantify the potential impact that Chinese retaliation could have on the company, with Goldman Sachs last week estimating a 29% hit to earnings if China were to ban sales of Apple’s products, and Cowen saying that fiscal 2020 profit could fall 26% on an iPhone ban.

Morgan Stanley on Thursday reiterated its overweight recommendation on Apple, though the analysts trimmed their price target to $231 from $240, citing peer multiple contraction.

To contact the reporter on this story: Beth Mellor in London at bmellor@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Paul Jarvis, Namitha Jagadeesh

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