Geopolitics are a whole lot more complicated than coming up with a hot new feature to sell your latest iPhone.
For this reason, JPMorgan and Credit Suisse think that there are no easy fixes to Apple’s current iPhone challenges. That’s because they involve the complexities of the burgeoning China vs. U.S. trade war, among other things, meaning that iPhone sales are victim to larger macroeconomic uncertainties.
In its latest note to clients, Credit Suisse says that “deeper structural issues” are to blame for Apple’s current struggles. While the current trade war is part of it, some of the challenges can also be blamed on “aggressive local competition and a narrower ecosystem advantage.”
This latter point may refer to the fact that smartphone users in China use WeChat. This mega app, which is more like an operating system, diminishes the difference between using an iPhone and an Android device. That’s because, within the app, both work the same way.
JPMorgan, meanwhile, has trimmed its price target on Apple from $235 to $233. While it remains bullish about Apple’s future, it blames economic uncertainty on struggling iPhone sales. Its analysts write that:
“The worsening macro environment and its likely impact on consumer spending globally is driving us to trim our iPhone shipment estimates, which in effect modestly lowers the earnings outlook for the near-term.”
It believes Apple will ship 183 million iPhones to China in 2018. This is slightly under the previous 185 million forecast.
It notes that its analysts “find investor concerns relative to Apple’s share loss in China somewhat overblown.” Nonetheless, it’s clear that larger economic forces at work are having an impact on iPhone sales figures.
One piece in a bigger puzzle
Pointing out that issues in China are impacting Apple is nothing new. Tim Cook blamed a China slowdown for disappointing iPhone sales last year. Analysts also worry that tariffs on China could force up iPhone prices. (Foxconn has responded by pointing out that it could manufacture iPhones for the U.S. outside of China.) Wedbush Securities analyst Daniel Ives thinks that a resolution to the China and the U.S. trade war would bump Apple back up to $1 trillion in value.
Still, it’s a reminder that, quite often, even a company the size of Apple isn’t in total control of its destiny when it comes to how its products do. Some fans may cry out for Apple to introduce innovative new features and 5G compatibility as soon as possible. But that’s just one part of a much larger issue.
Source: Business Insider