Apple’s iPhone Sales Are at Risk as Chinese Currency Falls

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Bank of America Merrill Lynch is getting more worried an economic slowdown in China will hurt
Apple

(ticker: AAPL).

The firm’s analyst Wamsi Mohan reduced his price target for Apple’s stock to $235 from $256, citing the large currency movement that will make iPhones more expensive in China.

We are “lowering iPhone units on risk from a weaker China,” Bank of America Merrill Lynch analyst Mohan wrote in a Monday research report. “Data points suggest some near-term weakness.”

Apple stock is up 1.5% to $219.55 in Monday morning trading.

The analyst said the U.S. dollar has strengthened against the Chinese currency by more than 10% since March. He noted the last time the currency moved this dramatically iPhone units sales fell 20% year-over-year in 2016.

Sales in China represented 18% of Apple’s revenue in its fiscal third quarter ended June 30.

As a result, Mohan cut his world-wide December quarter iPhone sales estimate to 73 million units from 77 million units. Despite his near-term caution, he reaffirmed his Buy rating for Apple stock due to the company’s services business growth and the strength of its stock buybacks and dividends.

In similar fashion, Goldman Sachs analyst Rod Hall reiterated his Neutral rating for Apple stock last week due to concerns about China’s economy. Hall reaffirmed a $240 price target.

“Macro data points out of China continued to weaken in October,” he wrote last Wednesday. “We find it hard to believe that the weaker consumer environment, should it persist, is going to be helpful to Apple.”

Apple’s less expensive $749 iPhone XR became available for sale last Friday. The release comes after the company launched the $999 iPhone XS and the $1,099 iPhone XS Max last month.

The company will report fiscal-fourth-quarter earnings after the market closes on Nov. 1.

Write to Tae Kim at [email protected]

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