Apple, Inc. (NASDAQ:AAPL) stock lost 6.4% over two sessions this week before recovering on Friday, with much of the weakness attributable to China’s decision to ban iPhones from government offices and companies that work closely with the government.
Deepwater Asset Management’s Gene Munster on Friday weighed in on the potential impact of the ban for Apple.
What Happened: The China ban will likely reduce Apple’s overall revenue by about 1% in 2024, Munster said in a note. The fund manager said Beijing’s move is driven by a desire for increased national security.
“We believe China is still supportive of Apple’s brand based on social media posts in the country that are influenced by the government,” he said. The average Apple device owner in China loves their Apple products just like customers around the world and most of them wouldn’t care whether there is a government ban, he added.
Munster said he does not expect a hit to Apple’s brand loyalty in China.
Apple’s Plan B: As U.S.-China relations sour, India could become an important part of Apple’s growth, Munster said.
“When it comes to the Apple growth story, the company needs new big markets to go after to sustain a 5-10% revenue growth over the next 7 years (until 2030),” he said.
Munster pointed to Apple CEO Tim Cook’s comments about India during the June quarter earnings call. At the time, Cook said that India clocked a June quarter revenue record and saw double-digit revenue growth, while two new Apple stores that opened in the country beat expectations.
Can India Move The Needle? Munster estimated that India now accounts for 3% or roughly $12 billion of Apple’s sales and it is growing by 20-25% year-over-year. In the long term, the country’s makeup of sales should equal that of China, which currently contributes to about 20% or $80 billion of the company’s revenue, he said.
If India could go to $80 billion in revenue in seven years, the country alone can add an additional 2 to 3% to annual revenue growth, Munster said.
“As China moves away from the West, India is likely to be a beneficiary, which should increase per capita GDP,” the fund manager said.
“That shift will take many years, and that rising tide should help offset a falling tide in China.”
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