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Apple's China Disaster

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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. (NASDAQ: 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. (NYSE: JWN), Tiffany & Co. (NYSE: TIF) and Starbucks Corporation (NASDAQ: 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.

Latest Ratings for AAPL

DateFirmActionFromTo
Dec 2019MaintainsOutperform
Dec 2019Initiates Coverage OnBuy
Dec 2019MaintainsOverweight

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Posted-In: Global Equities Research Trip ChowdhryAnalyst Color Price Target Analyst Ratings Best of Benzinga

 

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