Analysts: China Isn't Targeting Apple In Trade War

Apple, Inc. AAPL has taken a beating in the month of May on concerns a breakdown in U.S. trade relations with China could leave Apple exposed to a potential boycott in China. Two analyst said Thursday Apple’s seems to have steered clear of trade war disruption up to this point, but it's still caught in the middle of a high-risk situation.

Bank of America analyst Wamsi Mohan reiterated his Buy rating and $230 price target for Apple.

Morgan Stanley analyst Katy Huberty reiterated her Overweight rating, but lowered her price target from $240 to $231.

iPhone Usage Steady

The U.S. Commerce department blacklisted Huawei this month, a move that caused plenty of Apple investors to worry that China could do the same for Apple in retaliation. Mohan said if China targets Apple, it could be inflicting more harm on itself than America. Bank of America estimates more than 2 million Chinese workers are employed in the Apple supply chain, making it difficult target for the Chinese government.

In addition, Mohan said a survey of more than 194,000 consumers around the globe indicates there has been no decline in intent to buy iPhone’s. The number of respondents indicating they intend their next smartphone purchase to be an iPhone has remained steady at around 30 percent through May. In China specifically, that percentage dipped from 32 percent in March to 26 percent in April, but has rebounded to 29 percent in May.

Mohan said App Store sales in China are actually on the rise.

Informal Ban, Perhaps

Huberty said it’s unclear whether or not Apple can get its devices exempt from the latest round of U.S. tariffs. However, she said it’s unlikely China will target iPhones given they are currently produced inside China.

“More likely in our view is that the government could place an informal ban on purchasing certain products as it has done in the past for parts of the market (such as for government officials several years ago), which could have a negative impact on iPhone demand,” Huberty wrote in a note.

She said even if the government doesn’t formally ban iPhones, Chinese consumers may also step in and boycott on their own.

Price Action

Apple's stock traded marginally higher at $177.92 per share on Thursday.

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