Apple's 'China Growth Renaissance' Unlikely To Be Hurt By Coronavirus, Analyst Says

The Wuhan coronavirus outbreak is likely to have a profound impact on the global economy given China's significance to overall global growth. Tech giant Apple Inc. AAPL announced it will shut of all its stores and corporate offices across mainland China until Feb. 9 due to the virus outbreak.

The Apple Analyst

Wedbush analyst Matt Bryson reiterated an Outperform rating on Apple with a  $400 price target.

The Apple Thesis

Much of the consumer buying of iPhones/AirPods in China and the surrounding countries has already taken place in the lead-up to the start of the Chinese New Year that officially began Jan. 25, Bryson said in a Monday note. (See his track record here.)on the books, with sales growing markedly year-over-year, as evidenced by Apple's strong earnings and guidance, the analyst said.

The limited transportation in major Chinese cities could dent iPhone sales in the region by 1 million at the most if the coronavirus persists into late February, with sales likely to be shifted from the March to June quarter, he said.

This would be less than 3% of annual iPhone sales — a very containable risk, Bryson said.

The one-week closure of Apple stores is having a negligible impact thus far, as the vast majority of sales occur online, the analyst said.

The fluid coronavirus situation is amply reflected in the company's wider-than-normal guidance range for the March quarter, he said.

Wedbush said it believes the fundamental impact from the issue to Apple's topline is negligible, especially as there were no price cuts or last-minute sales around the Chinese New Year.

"While China is a major part of our bull thesis and growth story of Apple for the coming 12 to 18 months, we do not view the impact of this virus epidemic as changing the numbers/merits behind the renaissance of growth in China for FY20/FY21 with a 5G super cycle the longer term driver," Bryson said.

Apple Price Action

Apple shares shares were down 0.67 at $307.43 at the time of publication Monday.

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Photo courtesy of Apple.