Why are massive smog clouds over China good news for Apple? Morgan Stanley analysts explain in their latest note to clients: Because pollution it suggests that Chinese manufacturing is ramping up again.
Probably correct? Sure. Slightly off-brand messaging for Earth Day? You bet!
The U.S. investment bank issued the note Wednesday, along with a “buy” rating for Apple shares. The report was shared by CNBC Pro (paywall).
While few people will be celebrating more pollution, Morgan Stanley probably does have a valid point when it suggests that it bodes well for Chinese manufacturing.
Mainland China had a big drop in air pollution after the coronavirus-induced shutdown earlier this year. Industrial output in China collapsed 15.3% annually between January and February. This is the biggest drop in 30 years. At the time, companies like Apple manufacturer Foxconn had to temporarily shutter some of their operations. Even when they did reopen, certain factories — including an iPhone critical site — did so with only around 10% of employees.
However, Morgan Stanley has been avidly monitoring nitrogen dioxide levels waiting for things to take a turn for the worst. Or, err, the better. Depending on where you stand on the whole Earth vs. the economy debate.
Morgan Stanley now thinks things are back to normal. It believes Apple is now on track to exceed its second quarter guidance for 32.9 million iPhone shipments. It could well exceed guidance for the quarter after that, too.
Things are a mixed bag for Apple right now. Apple Stores remain closed everywhere in the world except China and its one store in South Korea. An international recession will almost certainly impact on demand for Apple devices. App Store earnings are up, though, and the iPhone 12 may arrive on time this fall.
AAPL closed at $276.10 Wednesday, having been buoyed by Morgan Stanley’s news. That’s good news for Apple — although, again, kind of ironic for Earth Day.