Can Apple Survive A Prolonged U.S.-China Trade War?
Zacks Investment Research | Dec 12, 2018 07:37AM ET
Apple (NASDAQ:AAPL) is caught in the crossfire of the U.S.-China trade war that is likely to linger despite recent attempts at a resolution. Certain developments earlier this week further dulled the investor outlook for the iPhone maker, bringing into focus the vulnerability of Apple’s stock price in a lingering trade war scenario.
Citi Slashes Apple’s Price Target (NYSE:TGT)
Financial major Citigroup (NYSE:C) cut Apple’s price target from $240 to $200 a share on Dec 10, citing trade wars are bad for tech stocks. Apple’s stock fell 0.6% on Dec 12 as investor concerns grew over the company’s business model and its grip on the Chinese market. The stock had suffered losses in early trading on Dec 11 before closing 0.7% higher.
Citigroup also suggested Apple share prices might sink to $125 if the latter’s revenue growth slows to 2-3% annually and its gross margins fail to meet expectations. In doing so, Citi has joined an array of Wall Street firms like Morgan Stanley (NYSE:MS) , Goldman Sachs (NYSE:GS) , UBS (NYSE:UBS) , Guggenheim Partners, Rosenblatt Securities and HSBC (NYSE:C) that have lowered expectations for the Apple stock.
Shares of the iPhone maker have lost 9.8% since July 6 when the trade war commenced this year with the United States and China imposing the first round of retaliatory tariffs.
The reason behind this setback could be Apple’s over estimation of the sale of its new iPhone models such as iPhone XS and iPhone XR, which was far lower than expected, enough for the corporate giant to slash production. In addition, the price reduction on older iPhones makes them more popular in developing countries than the newer models.
China accounts for 18% of Apple’s total sales, Citi said, indicating the appalling effect of the lingering trade dispute on technology stocks such as Apple. In fact, Technology Select Sector SPDR Zacks Investment Research
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