Apple's iPhone sales in China were down more than 35% in November following another double-digit percentage decline in October, according to a bearish note from Credit Suisse.
Total Chinese shipments since the launch of the iPhone 11 family in September are now down 7.4%, year-over-year, over the past three months, according to Credit Suisse’s checks. Chinese iPhone sales dropped 10.3% year-over-year in October.
“While early indicators of demand on the iPhone 11 cycle were consistently better-than-expected, sustained softness in China is an incremental concern, particularly given the increasingly easy year-over-year compares,” analyst Matthew Cabral said.
The firm has a neutral rating and $221 price target on Apple. Apple shares wavered between small gains and small losses on Thursday as President Trump indicated the U.S. and Chinese were getting closer to agreeing to a trade deal.
Cabral pointed to increased local competition and a narrower ecosystem advantage in China as some of the reasons for Apple’s struggles in the country, but the firm is hesitant to model a global decline based on the weak data points in China.
But China still looms over the stock as the next round of tariffs on Chinese-made goods, including smartphones and other consumer electronics, is scheduled to go into effect on Dec. 15.
“Apple would have a difficult time pushing through tariff-related price increases to U.S. consumers without a commensurate impact on demand," Cabral wrote. "We estimate a potential 1.6 point hit to GM and an 89 cent impact to EPS vs. our base case CY20 forecasts, all else equal, if Apple had to absorb a 15% tariff on iPhone.”