Apple stock soared to new highs Thursday following reports that December iPhone shipments in China had risen by about 18% from 2018.
While positive, that may not be the full picture, given this year’s differences in launch timing and pricing. In fact, an analyst at Credit Suisse estimates iPhone revenue in China fell 23% for the last three months of 2019.
The back story. Apple stock’s (AAPL) gain of 86% led the Dow Jones Industrial Average in 2019. That optimism stems partly from its growing services and wearables businesses, as well as the belief its iPhone 11 is selling better than expected.
But Apple’s run up to more than $312 has left even some bullish analysts in the dust, with lower price targets than current levels. That means it was time for bulls to raise price targets even higher or adjust their ratings accordingly.
The stock rose on Thursday after data from the Chinese government said Apple shipped 3.2 million phones in December, an 18% jump from December 2018. That news came as overall mobile phone shipments in the country fell 6.2%.
What's new. Credit Suisse analyst Matthew Cabral called the data a significant improvement from drops in October in November, though December 2018 was an easier comparison to beat.
He did write that by taking into account 2018’s staggered iPhone launch by looking at cumulative shipments over September to December, units in China were actually down 3.2% in 2019.
He also notes that about 70% of the newly launched units in China during the quarter ending in September were the lower-priced iPhone 11 model. Taking that into account, along with price cuts this year, he estimates China iPhone revenue was down 23% in the last three months of the year.
Looking Ahead. Cabral has a Neutral rating on the stock, though he did raise his price target to $275, up from $221.
With his estimate for calendar fourth-quarter revenue in China to decline 23%, growth outside of China will be needed for the company to hit his total iPhone revenue estimate of $50.9 billion.
“We remain Neutral, as we need greater line-of-sight to upward EPS momentum (particularly Services-led) to justify the stock’s increasingly premium multiple,” he wrote.
Apple stock was up 0.4% to $310.80 Friday, while the S&P 500 index was up 0.1%.
Write to Connor Smith at [email protected]