Apple Analyst Sees ‘Sustained Softness’ in China iPhone Sales

(Bloomberg) -- Apple Inc. has recently seen weak iPhone sales in China, according to Credit Suisse, adding to recent caution about the region.

Shipments of the iPhone fell 35.4% on a year-over-year basis in November, “significantly lagging the 0.2% y/y increase in the broader Chinese smartphone market,” analyst Matthew Cabral wrote to clients, citing MIIT data. Cabral has a neutral rating and $221 price target on the stock.

While monthly data is “volatile” and the timing of recent iPhone launches could be skewing comparisons, “the drop in November marks the second straight double digit decline.” This “sustained softness” is “an incremental concern,” although Credit Suisse is reluctant to extrapolate the trend to other regions.

Shares of Apple fell as much as 1.3% on Thursday, though the stock pared those declines after President Donald Trump tweeted that the U.S. was “getting VERY close to a BIG DEAL with China.” Apple shares have been highly correlated to issues surrounding the U.S.-China trade war.

Credit Suisse wrote that the lower-priced iPhone 11 was the most popular model, following similar commentary from KeyBanc Capital Markets about North America and Western Europe. The lower average selling price of this model “likely adds further pressure to Apple’s Greater China sales,” Credit Suisse wrote.

The comments come after UBS wrote that “overall iPhone demand in China was down ~35% YoY in the month of November,” a trend that was “likely impacted” by the timing of model launches.

“If we look at the data over the last five months, which normalizes the impact of launch timing, iPhone shipments are down 5% versus 3.3% overall market decline,” wrote analyst Timothy Arcuri in a note dated Dec. 11. UBS has a buy rating and $280 price target on Apple.

Apple derived nearly 17% of its 2019 revenue from the greater China region, according to data compiled by Bloomberg. The iPhone accounted for nearly 55% of its total 2019 revenue.

Earlier this week, Rosenblatt Securities wrote that Apple may cut production of its iPhone 11 Pro and iPhone 11 Max by about 25%, due to weaker demand for the two models.

©2019 Bloomberg L.P.

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