Apple's China Disaster

In a new note on Wednesday, Global Equities Research analyst Trip Chowdhry makes some bold predictions about the Chinese economy and the devastating potential impact it could have on Apple Inc. AAPL. Chowdhry is now calling for China to slip into a recession by 2016, an event which he believes will have major implications for companies that rely on discretionary spending.

China Recession

Despite the fact that the World Bank is forecasting a +7.0 percent growth rate for China’s GDP in fiscal 2016, Chowdhry is now calling for a 2.0 percent contraction in China’s GDP in 2016. Without going into specifics, he draws comparisons to the aftermath of the U.S. Financial Crisis.

“Factoring in various events that led to [the] 2008 and 2009 Global Recession, we assume that the GDP of China will be negative 2% in 2016,” Chowdhry wrote.

Related Link: Apple Downgraded By Bank Of America On iPhone 'Headwinds'

Luxury Brands Impacted

Chowdhry warns that a China recession will weigh heavily on the revenues of consumer discretionary companies such as Nordstrom, Inc. JWN, Tiffany & Co. TIF and Starbucks Corporation SBUX. He points out that all three of these companies endured year-over-year revenue declines of between 3 and 6 percent in 2009.

Disastrous For Apple

According to Chowdhry, Apple will be hit hardest of all by a recession in China. “We are expecting a disastrous China business for Apple and are reducing Apple’s revenue estimates from China for both 4QFY2015 and full FY2016 by 8%,” he explained.

Chowdhry is now calling for Q4 2015 earnings per share of $1.79 and revenue of $48.9 billion for Apple, both below consensus.

Despite the alarming warning, Global Equities Research now has a $155 target for Apple’s stock, about a 33 percent upside from its current share price.