Wedbush analyst Daniel Ives had a simple reaction to U.S. President Donald Trump's tweet that companies need to look for alternatives to China: for a company like Apple Inc. AAPL, it's a "nightmare that doesn't go away."
Trump's Friday tweet in which he demanded U.S. companies move out of China is an impossible scenario for a company the size of Apple, Ives said on Bloomberg TV Monday morning. In fact, it's impossible for Apple to shift more than 5% to 7% of its total production outside of China in an 18-month period.
If the company were to divest 20% of its Chinese exposure, Ives said it would take the company at least three years to do so. The Street can quantify potential risks for a company like Apple, but the bigger risk is a disruption to the supply chain. Under a worst-case scenario the company could see 10% to 12% in earnings downside
Why It's Important
Encouragingly, Ives said Trump's "bark is worse than the bite" even though there is "no doubt" that Apple is the poster boy for the U.S.-China trade war. As such, the bullish case for Apple's stock remains unchanged and investors should continue "navigating through this near-term choppiness" and stick with "winners" like Apple.
Investors may want to consider holding on to FANG stocks along with software names with "minimal exposure" to China, the analyst said.
Apple's stock traded higher by 1.9% to $206.50 at time of publication.
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