Indian iPhone Production Boosts DA Davidson's Confidence In Apple

A report that Apple Inc. AAPL contract manufacturer Foxconn will start assembling products, including the iPhone X, in India in the coming year boosts confidence in Apple’s stock, says D.A. Davidson, which reiterated its Buy rating on Apple on Friday.

The Analyst

D.A. Davidson analyst Tom Forte reiterated a Buy rating on Apple with a $280 price target.

The Thesis

Apple shares have pulled back nearly 30 percent since its September quarterly earnings report, while the S&P 500 has dropped just 12 percent over that time.

Part of the pullback is related to concerns over tariffs because of Apple’s reliance on manufacturing in China, Forte said in a Friday note. (See the analyst's track record here.)

But the report that Foxconn, the world’s largest contract electronics maker, will start making the new iPhones in India boosts the belief that Apple is among the companies best situated to move manufacturing out of China and avoid tariffs, the analyst said. Foxconn is the biggest iPhone assembler.

“We are not surprised by this news and fully expect other manufacturers for Apple and our other covered companies to continue to move either part or all of their production out of China,” Forte said. “The article also noted that lower end models including the SE and 6S are already manufactured in India."

The Reuters report said the Taiwanese contract manufacturer will invest about $350 million to expand a plant in Sriperumbudur, a town in Southern India’s Tamil Nadu state. It’s not yet clear if the iPhone assembly work is being moved from Foxconn factories in China, somewhere else, or represents additional production. C

About half the world’s iPhones are made by Foxconn at a complex near Zhengzhou, China.

Foxconn also is planning a new factory in Vietnam, according to a report from Vietnamese state media earlier this month. The company has said tension between the United States and China over tariffs is its biggest challenge.