Apple Inc. is facing a lack of support on the stock market in recent weeks as traders wonder whether the firm will be able to grow should China’s economy slow down. This morning Andrew Uerkwitz of Oppenheimer sought to quell those fears. Mr. Uerkitz says that Apple’s “growth in China is not over”, though there are other risks facing the stock.
The Oppenheimer report put a price target of $155 on shares in Tim Cook’s firm, and said that “Apple’s growth potential in China, the overall smartphone market, and in other products is underappreciated.” The research house says that its clients should Buy shares in the Cupertino firm.
Apple China risk overstated
Oppenheimer says that Apple will gain in market share “high-growth, low-penetration emerging markets,” through the rest of 2016 and beyond. Android’s place in the premium market is going to continue to get compressed, says the analyst, and that will drive higher sales and profits for Apple in the months ahead.
Apple shares have traded down in recent days because of worries that sales of the iPhone 7 will come in below those of the iPhone 6, and that an economic slow down in China will compress sales in its bast market.
Last week Morgan Stanley’s Katy Huberty said that Apple was not only killing high-end Android demand in China, it was also pushing more buyers to upgrade to a premium smart phone. “Apple is converting previously mid-market smartphone purchasers to their platform”, she wrote.
The report says that “discounting Apple based on these concerns is unjustified.” Just because one, or more, research house is telling traders to relax doesn’t mean they’re going to listen, however.
Watch out on Wall Street
Even though Oppenheimer thinks that China won’t be a major roadblock for Apple , the research house does see other problems ahead for the firm. Traders could flee from shares in Tim Cook’s firm as they perceive weak demand ahead and that, as it did in recent weeks, could put pressure on shares through the second half of the year.
Mr. Uerkitz says that web-based firms are the most likely to benefit if traders move from Apple shares. He thinks Google, Netflix and Facebook could all see inflows if the mood on Wall Street turns against Apple.
Overall Oppenheimer expects that Apple will outperform the market in the second half of 2015, and will not be hurt by global problems as deeply as those it faces in the market. The research house said it would be watching growth on the services side of the business in order to see if it might drive significant growth in the years ahead.
Sherri Scribner of Deutsche Bank holds a dissenting view. She reckons that Apple growth next year will be lower than that of the smart phone market as a whole. In the second quarter of 2015 year on year growth in the market was just 2 percent. That means that Apple sales growth could be close to flat after the launch of the iPhone 7.