Apple’s Performance in China and India Provides Optimistic Outlook
Apple Inc (AAPL) is set to deliver a promising performance in China and India, according to Piper Sandler analyst Harsh Kumar. He has maintained an Overweight rating for Apple and raised the price target from $180 to $220.
Kumar believes that Apple is well-positioned to execute its key segments and markets during the June quarter. He expects Apple to deliver September assumptions that will either match or slightly exceed street expectations. This optimism is primarily driven by the strength of iPhone sales in India, which offsets the general macro weakness in China.
For the June quarter, Kumar predicts that Apple will slightly miss street earnings per share (EPS) expectations of $1.19 by a margin of $0.02 to $0.04. Additionally, he anticipates that Apple’s revenue will be slightly lower than the street’s estimate of $81.7 billion for the quarter.
Kumar acknowledges the potential soft conditions in China, which might reflect in the September quarter guide. However, he highlights that Apple’s iPhone sales within the Chinese market are expected to meet internal expectations. Although there are concerns about other products like watches, AirPods, and Macs, given the weak macroeconomic outlook for both June and September, iPhone sales in China have shown positive momentum over the last three quarters.
In the first quarter of 2023, for instance, while the overall Chinese handset market declined by approximately 5%, Apple’s share grew by roughly 6%. This indicates that concerns about a slowdown in iPhone sales in China might be overblown.
Kumar estimates that Apple derives around 10% of its sales from phones in China. Even if the Chinese market experiences a mid-single-digit decline and Apple maintains the same pace, the impact would only amount to 0.5% of Apple’s iPhone sales within the quarter.
On the other hand, India is proving to be a rapidly emerging market for Apple. Recent openings of brick-and-mortar stores in the country have fueled its momentum. Counterpoint reports that India is likely to contribute around 4% of iPhone sales for Apple in the upcoming June 2023 quarter, with a 50% year-on-year increase.
Apple is expected to reach a 5% market share within India this year, up from approximately 2% in the previous year. The dominance of the iPhone in the high-end segment of the Indian market is driving this growth.
Overall, while Apple is holding up relatively well in the Chinese market and might be able to offset any considerable declines, India is expected to make a positive contribution and more than compensate for any potential setbacks in China.
The increased price target and multiple set by Kumar reflects his growing optimism for Apple’s execution in the second half of the year.
In conclusion, Apple’s performance in China and India presents an optimistic outlook for the company. Despite concerns about the macroeconomic climate in China, iPhone sales have shown positive momentum. Additionally, the rapidly emerging market in India, fueled by the opening of new stores, is expected to drive growth for Apple. The increased price target reflects confidence in Apple’s execution going forward.
