Apple stocks were trading nearly 3% lower early yesterday morning. This followed HSBC slashing the technology firm’s price target over concerns that the trade war between the U.S. and China could seriously harm the company.
HSBC Global Co-chief of Consumer and Retail Research Erwan Rambourg lowered his price target on Apple stocks from $180 to $174 but kept the current ‘reduce’ rating unchanged.
The drop in Apple’s stock price happened against the background of a worldwide sell-off in technology shares, which in turn followed Google’s suspension of certain business activities with Chinese telecoms firm Huawei during the weekend.
Rambourg’s note to investors suggests that the tariff war between the U.S. and China might either force Apple to raise its prices, which would further reduce demand given that iPhones are already regarded as too expensive, or negatively impact profit margins.
Secondly, Rambourg said there is the possibility that buyers in the Chinese market will increasingly replace Apple products with local brands that offer the same or better functionality, e.g. Xiaomi and Huawei.
The analyst also holds the view that, despite Apple trying its very best to boost its services division to compensate for falling iPhone demand, this cannot take the place of the company’s core iPhone product.
Apple stocks have so far lost 10% of their value since the beginning of May – one day after the firm published its latest results, and highlighted services as consistently showing strong growth.
Rambourg added: “cheering a quarter in which iPhone sales were down 17% at a time when the stock was trading at a three-year high in terms of forward PE (price-to-earnings) valuation we think is very counterintuitive.”
When asked for comment by CNBC, Apple failed to respond immediately.