Bullish Apple analysts aren’t panicking about China coronavirus … yet


Bullish Apple analysts aren’t panicking about coronavirus… yet
No need to panic. Right now, at least.
Photo: CNBC

Wedbush analyst and Apple enthusiast Dan Ives isn’t worried about the impact of the new coronavirus outbreak on Apple’s share price. At least, not yet. In an interview for CNBC show Squawk Box, Ives said he views any dips in Apple’s share price as “buying opportunities.”

And he’s not alone in being optimistic at a time when lots of others are nervous.

“You’ve got to differentiate between the headlines and the fundamental impact,” is Ives’ main piece of advice on CNBC. He thinks that the “bark” of this story will be worse than the “bite.”

Over the weekend, Apple announced that it is closing 42 of its Apple Stores in China through February 9. This is a direct result of coronavirus, which originated in the country.

Analysts aren’t sweating the coronavirus

Analyst Ives isn’t too worried about the coronavirus’s impact on Apple, though. When it comes to retail, Ives thinks that this will only mean the deferral of sales, rather than a loss. That means that, while Apple could suffer a few lower-than-expected weeks, an upswing will follow.

He also points out that Chinese retail is largely carried out online. In fact, online sales platforms often do very well during viral outbreaks. Although Ives doesn’t dwell on this, Chinese retail giant Alibaba first noticed this effect during the SARS coronavirus epidemic of the early 2000s.

The bigger concern is what this could mean for manufacturing. There’s already concern about how the rapidly spreading coronavirus could affect manufacturing among Apple’s suppliers. Despite Cupertino’s push to diversify, China remains the main hub for Apple device production. Ives thinks there’s nothing to worry about in the short term. However, if the outbreak continues through mid-to-late February it “becomes a broader issue.”

The timing, he acknowledges, isn’t great. Investors were just getting over last year’s trade war between the United States and China, which threatened tariffs that could have jacked up Apple prices. Now Apple faces a second China-related crisis.

But with a possible 5G-fueled iPhone supercycle on the horizon, he thinks there’s every reason to be excited about Apple. He contends that, by December 31, AAPL is going to be trading above the $400 mark. AAPL currently trades for $312.39. That gives it a market cap of approximately $1.36 trillion.

Gene Munster chimes in

Loup Ventures analyst Gene Munster isn’t panicked about the coronavirus, either. “Setting aside the human impact, the financial impact on Apple’s business is fractional,” he wrote in a note to clients over the weekend. “We estimate these closings will have a negative $100m impact on revenue in the Mar-20 quarter or just under 1% of greater China revenue,” Munster wrote. However, he also thinks that the timing of the Lunar New Year may soften this impact somewhat.

Ultimately, Munster concludes that:

“This is another example that shows that China headlines on Apple’s business cut both ways because the company has the largest exposure to China of any US tech company. On the negative side, the company was in the vortex of the trade dispute and now the coronavirus. We see the positive side carrying greater weight, that China will be the biggest or second-biggest (behind India) tech growth market for the next decade … Apple is better positioned than any other US tech company to capitalize on it.”



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