From a note to clients by analyst Katy Huberty that landed on my desktop Wednesday:
iPhone China installed base share gains continue through May. Following the escalation of trade tensions between the US and China in early May, Apple shares fell ~12% over the course of 2 weeks as investors feared further escalation would result in meaningfully weaker iPhone demand from Chinese consumers similar to the October-December 2018 period when more restrictive trade measures were put into place and Apple lost Chinese smartphone installed base share for three consecutive months (and negatively pre-announced for the first time in 15 years).
However, recent data from push-messaging service provider Jiguang shows May 2019 marked the 5th consecutive month of Y/Y China smartphone installed base share gains for Apple, gaining 51bps of share Y/Y, to 19.5% market share [See Exhibit 1, below].
May market share gains decelerated from 190 bps average over the prior 4 months but combined with accelerating App Store growth in China, we believe this represents a constructive data point when juxtaposed against weak China demand environment late last year and investor fears of a dramatic drop-off in near-term iPhone demand in China.
In our view, iPhone price cuts, greater usage of financing vehicles, lower VAT taxes and Chinese consumer confidence that is up ~10 points from last summer (per the National Bureau of Statistics of China) are contributing to surprisingly stable demand trends.
Cue Exhibit 1:
Maintains Overweight rating and $231 price target.
My take: Anyone else having deju vu?