- The worst of Apple's weak iPhone – a theme that dominated investor concerns and weighed heavily on its stock – is now behind investors, according to a new report from UBS.
- The review of the hardware supply chain in Asia shows that stocks have started to clean up in China, said analyst Timothy Arcuri.
- Apple warned investors earlier this year that its quarterly business figure would be lower than previous expectations due to weak iPhone sales in China.
- Watch the live Apple trade.
Apple investors should find comfort in the latest assessment of the company's difficulties by UBS analyst Timothy Arcuri.
The bull Apple told customers Wednesday that the worst of the slowdown of its flagship product was in the rearview mirror. The problem weighed on the stock price of Apple and has dominated for months the Wall Street dialogue on the company.
Mr. Arcuri relied on the company's updated Asia hardware supply chain analysis, which showed signs of an early inventory of iPhone inventory in China. The region is a tough spot for Apple, especially since the weakness of the iPhone in China has prompted CEO Tim Cook to issue a rare warning regarding quarterly sales earlier this year.
"Although the makeup of the market in March is still bad, the tone of the supply chain is starting to improve and price reductions in China may begin to erase the channel inventory." ", wrote Arcuri. "Purchasing estimates for XR are currently up Q / Q in June – which is atypical for the latter of a" new "model cycle (good for the short-term QRVO), but which reflects the destruction of stocks. "
The iPhone's inventories for the first quarter remained unchanged from the company's previous estimates, at around 40 million units, with a rise in iPhone 8+ and older models offsetting. entirely a decline of newer models, writes Arcuri.
This led to a lower average selling price, which caused UBS to lower its March sales and earnings by $ 57.5 billion and $ 2.40 per share to $ 56.5 billion. $ 2.33 per share, respectively.
This assessment contrasts with the prospects of analysts at HSBC, who have repeatedly warned investors against the slowdown in Apple's sales in the region. The company found that wealthy consumers in China have turned away from the iPhone to turn to other brands of Huawei and Samsung.
Read more: HSBC continues to pound the table on the slowdown of Apple in China
As for the valuation of the security, Arcuri noted that Apple's stock has historically become cheap relative to the wider market.
Apple is now trading at a discount of 18%, on a relative basis, compared to the forward market price / earnings ratio of the expanded market – well below Apple's 10-year average of a discount of 8%. However, in absolute terms, Apple is trading at roughly its historical average, 14 times its futures earnings.
At the same time, Arcuri said his optimistic outlook was linked to macroeconomic weaknesses that are holding back demand for products in China and shrinking "innovative offerings".
Apple's shares were trading 26% below their record of last October. They have increased by 20% this year.
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