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Leading industry analyst Craig Moffett has expressed skepticism about Apple’s plans to shift the assembly of iPhones from China to India, deeming such moves unrealistic.
Moffett, who has received high rankings from Institutional Investor for his analysis, shared insights in a memo to clients following a Financial Times report suggesting that Apple is targeting a production shift by the end of next year.
His primary concern revolves around the issue of tariffs, as essential iPhone components would still be manufactured in China, raising questions about how costs could effectively decrease through this relocation.
“The challenges posed by tariffs are extensive, and simply moving operations to India won’t resolve these issues entirely. While it may provide some relief, significant concerns remain,” Moffett stated during an appearance on CNBC’s “Fast Money.”
He highlighted the complexities involved in diversifying Apple’s supply chain, arguing that it would continue to heavily rely on Chinese manufacturing, which could face pushback.
“Ultimately, the ongoing global trade conflict poses a dual challenge, influencing both operational costs and sales performance. Relocating assembly to India might offer marginal advantages, but the implications for sales could be much more significant,” Moffett noted.
In conjunction with this evaluation, Moffett revised his price target for Apple shares from $184 to $141, indicating a potential decline of 33% based on the latest closing prices. This figure represents the lowest target among Wall Street analysts, as reported by FactSet.
“I wouldn’t categorize myself as overly pessimistic about Apple. I hold the company in high regard. My apprehensions are more about its valuation than its overall performance,” he explained.
Since assigning a “sell” rating to Apple at the beginning of January, Moffett has observed a 14% dip in the company’s stock.
“This decline isn’t indicative of any inherent flaws in Apple as a business. They maintain a robust balance sheet and a strong customer base. However, there are challenges in price competitiveness, especially with tariffs impacting product costs. Additionally, the broader economic landscape may contribute to slower consumer demand,” he added.
Moffett also mentioned that Apple faces challenges from its service providers, which are not mitigating the impact of tariffs.
“The potential for reduced consumer demand due to rising prices is a significant concern. Major carriers, including AT&T, Verizon, and T-Mobile, recently announced that they will not absorb the additional tariff costs on handsets, which means consumers will shoulder these expenses themselves. This situation is likely to lead to longer device usage cycles and decreased upgrade rates, affecting next year’s projections,” he remarked.
Furthermore, Moffett pointed to the impact of U.S.-China tariffs on Apple’s market performance, particularly in China, where consumer preference is shifting towards local brands like Huawei and Vivo.
“Apple is indeed confronting a serious challenge in this respect. Sales volumes are increasingly favoring local competitors over Apple,” Moffett stated.
Despite recent fluctuations, Apple shares experienced a notable uptick, closing over 6% higher last week, ahead of the upcoming quarterly earnings report scheduled for next Thursday.
For those looking to enhance their investment knowledge, joining the next “Fast Money” Live event on Thursday, June 5, at the Nasdaq in Times Square may offer valuable insights.
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