Citi Cuts Apple Price Target, iPhone Estimates On China Concerns

The U.S. trade relationship with China has deteriorated further in recent weeks, and one analyst says Apple, Inc. AAPL investors should brace themselves for the trade war to take a bite out of Apple’s iPhone sales.

The Analyst

Citi analyst Jim Suva reiterated his Buy rating for Apple but lowered his price target from $220 to $205.

The Thesis

Suva cut his China revenue and China iPhone unit sales roughly in half, reducing total iPhone sales estimates by between 7 million and 8 million units in the June and September quarters and 16 million to 17 million units in fiscal 2020. Suva estimates 1 million iPhone units represents about 5 cents in EPS for Apple.

“We are proactively slashing our iPhone unit sales as we believe the US/China trade situation will result in a slowdown of Apple iPhone demand in China as China residents shift their purchasing preference to China national brands,” Suva wrote in the note.

Citi’s latest research suggests Apple’s brand in China has already been weakened from the trade war. Despite the softer outlook, Apple shares are already pricing in much of the trade war concerns after dropping 14.3 percent since May 1. Suve remains optimistic about the long-term outlook for Apple Services, including the upcoming launch of Apple Arcade.

Price Action

Apple's stock traded $178.99 per share at time of publication.

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