Apple's Market Slide Over China iPhone Ban Exaggerated: Potential Buying Opportunity Emerges

Exaggerated.

By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  

Apple lost almost $200bn in market valuation in just two days on the news that China would ban iPhone usage in government offices and state-backed companies. Of course, China is one of Apple's biggest markets; the company makes roughly a fifth of its revenue from China and it would be a shame to lose market share in such a huge marketplace, but the market has certainly overreacted to the latest news, because Chinese government staff could already not show up at work with their iPhones.

So, the chances are that, if you are a government worker in China, you already didn't have an iPhone! In this respect, an analyst at Wedbush highlighted that the ban would affect around half a million iPhones over the roughly 45 mio that he expects the company to sell in China over the next 12 months. That's around a 1% hit. Another analyst at Evercore ISI said that the government wouldn't got too hard on Apple either, as even if Apple moves production toward India, today, most iPhones are still assembled in China, and making Apple angry would cause many job losses, and that Xi is not in a position to afford today. Unfortunately for Apple, its iPhones lost market share from 20% to 16% between the first and the second quarter of this year, but iPhones market share stands at 65% of the smartphones worth more than $600 in China, according to IDC – cited by the WSJ. Huawei, on the other hand, stands for around 18% of the sales of iPhones of a higher price range.

Therefore, the latest Apple selloff could be an opportunity for buying a dip. Apple lost almost 3% yesterday, after falling more than 3.5% the day before. The share price is now below $180 per share. 38 analysts on CNN's business survey point at a median price expectation of around $200 for Apple shares for the next 12-months. The high estimate goes up to $240 per share.