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Negative Chinese Trade Rhetoric Comments Create Buying Opportunity In Apple

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Negative Chinese Trade Rhetoric Comments Create Buying Opportunity In Apple

Drexel Hamilton termed the selloff in Apple Inc. (NASDAQ: AAPL) following a Global Times report about 45 percent imports tariff from China as a buying opportunity.

President-elect Donald Trump indicated during his campaign that he would impose imports tariff. According to an article in Global Times, this would mean that American brands, including iPhone, would take a hit.

Analyst Brian White doesn't see the possibility of such a big trade disruption, pointing out the trade relations importance between the two countries. Therefore, he thinks that Apple has enough opportunity in China to grab and cited 22 percent of sales from the region in fiscal year 2016.

Another factor is that making the device within the US meant that Americans would have to pay more than what they currently pay for the purchase of iPhone. The brokerage thinks that the increasing manufacturing costs, if made in the US, would not only impact iPhone sales but also the companies dependent on mobile Internet as they would also get affected.

Given the volume of iPhone sales in the US, White said, "We believe finding the workers with the willingness and skill set to assemble an iPhone in the U.S. at the volume levels required by Apple would be an insurmountable task. In China, workers generally are young, live in a dorm on the manufacturing campus and work very long hours."

The brokerage believes Apple is unlikely to make high-volume product in the US based on the past experience. For instance, in 2014, the company started manufacturing Mac Pro in Texas with a commitment until 2021. This is termed as low volume product.

White maintained his Buy rating and target price of $185.

Latest Ratings for AAPL

DateFirmActionFromTo
Jun 2019Initiates Coverage OnHold
Jun 2019Initiates Coverage OnOutperform
Jun 2019MaintainsBuy

View More Analyst Ratings for AAPL
View the Latest Analyst Ratings

Posted-In: Brian White China Donald Trump Drexel HamiltonAnalyst Color Analyst Ratings Tech Trading Ideas Best of Benzinga

 

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