If a market experiences a downturn, any outliers still thriving is tantamount to a display of strength. Apple’s (AAPL) recent performance in the Chinese smartphone market, says Evercore’s Amit Daryanani, is just that.
The latest data from the region shows that in May, smartphone shipments within China were down by 30.7% year-over-year and 16.3% from the previous month, reaching 22.6 million. On the other hand, Apple shipments put in a much better performance, displaying year-over-year growth of 35.2%. and a 37% month-over-month uptick.
The last two months’ sales contrast with the year’s first quarter, in which say smartphone sales increased by 102% compared to the same period last year. However, Daryanani thinks the slowdown in April and May “more likely constitutes a pause than the beginning of a longer-term slump.”
Either way, Apple appears unaffected by the drop, with iPhones sales building on Q1’s strong performance. In the first quarter, iPhones exhibited growth of 67%, and Daryanani says the “monetization narrative that is now just starting to take hold could drive sizable upside.”
That said, with the iPhone’s high penetration rates, or as the analyst puts it, “everyone that wants an iPhone has one,” Daryanano thinks it is unlikely iPhone sales will reach the “$165 billion high watermark from FY18.” Instead, the focus will be on keeping the 1 billion “installed base” happy and making sure it can keep on growing the base via initiatives like refurbished phones and cheaper models.
However, with pretty easy comps for iPhones in the June quarter, Daryanani sees demand “staying robust.”
“Net/net,” the 5-star analyst summed up, “The data point shows sustained strong growth out of China despite a softer overall smartphone market. Furthermore, we expect growth to remain strong for AAPL in Jun-qtr and beyond as the company benefits from a trifecta of – iPhone growth in N. America (stimulus + reopening), ecosystem expansion, and monetization of their install base.”
So, good news for the tech giant, but what are the implications for investors? Daryanani sticks to an Outperform (i.e., Buy) rating and keeps the $175 price target as is. Investors could be pocketing gains of 34%, should the forecast play out according in the coming months. (To watch Daryanani’s track record, click here)
The rest of the Street projects healthy gains too; shares are anticipated to add 21% of muscle, given the current average price target stands at $157.88. Overall, the analyst consensus rates the stock a Moderate Buy, based on 20 Buys, 5 Holds and 2 Sells. (See Apple stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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