From a note to clients by analyst Timothy Arcuri that landed on my desktop Wednesday:
China demand appears to be holding Monthly smartphone data suggests overall smartphone and iPhone demand in China has remained somewhat stable in May, consistent with CEO Tim Cook’s comments about Apple not being targeted by China in retaliation for increased trade tensions between US/China. Apple stock has recovered ~12% since the CEO’s comments after declining roughly 18% since the beginning of May when trade relations worsened. Also, supply chain checks do not suggest a material change to date. While China demand trends bear watching and we do expect some share loss in the region, we note that this data showed a more immediate impact/backlash last Nov/Dec following the arrest of Huawei CFO. UBS Evidence Lab 10th Global Smartphone Survey conducted in April indicated soft smartphone market across regions but trends were better than six months ago.
China iPhones down slightly more from April but still healthy vs prior 4 months Analysis of monthly government smartphone data from China suggests the annual rate of decline for Apple iPhones in the month of May was slightly worse (down 6% YoY vs 3% in April) but still healthy compared to the average decline of 66% in the prior four months (Dec-Mar). The overall smartphone market was up 1% YoY vs 6% in April mainly due to compares. On a sequential basis, Apple seems to have outperformed the market with seq. growth of 36% vs 5% for the smartphone market though it is likely due to seasonality (a year ago Apple growth was 41% vs 10% for the market).
Maintains Buy rating and $225 price target.
My take: The iPhone’s sequential growth took quite a U-turn, according to this report, going from underperforming the Chinese smartphone market 41% vs. 10% a year ago to outperforming 36% vs. 5%. (Not clear here if they’re talking dollars or units; probably the latter.)