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Apple May Struggle as China Risks Mount, JPMorgan Says

10
Henry Ren
·2 min read

(Bloomberg) — Apple Inc. shares are unlikely to outperform in the second half of the year, as a high valuation and mounting China risks take the shine off a highly anticipated product launch next week, according to JPMorgan Chase & Co.

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Analysts led by Samik Chatterjee cut their price target on the world’s largest company to $230 from $235 per share in a note Friday, saying China’s clampdown on iPhone use come as competition is heating up in Apple’s largest foreign market, where the homegrown Huawei Technologies Inc. recently launched its flagship model, Mate 60 Pro.

“The restrictions will make it tougher for Apple to continue to deliver share gains in the local market,” they wrote.

Still, they say China’s plan to broaden the ban on use of iPhones by government and state company employees probably won’t have a material sales impact since previous curbs haven’t hurt consumer behavior much.

Apple shares rose 1% on Friday, following a two-day decline that wiped out nearly $200 billion of market value.

JPMorgan’s comments came as Citigroup Inc. rescinded a 90-day upside catalyst watch on the stock. “We view the recent news flow around China and Huawei Mate 60 launch as a headline risk for the stock,” according to analysts led by Atif Malik.

Apple’s stock performance for the rest of the year now hinges on its iPhone 15 launch next week, JPMorgan said. But even if investors turn more upbeat on iPhone sales following the event, any upside to the shares will be capped by its 38% rally so far this year, the analysts said.

They also pointed to the stock’s high valuation multiple — at 27 times forward one-year earnings, Apple trades at a 16% premium to its five-year average level.

—With assistance from Ryan Vlastelica and Rheaa Rao.

(Updates to market open.)

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