Top analyst Craig Moffett believes that any intentions to relocate U.S. iPhone production to India are not feasible.
Moffett, recognized as a leading analyst numerous times by Institutional Investor, communicated with clients on Friday following a report from the Financial Times that Apple was planning to shift production from China to India by the end of next year.
He raised concerns about how such a move could lower tariffs since components for the iPhone would still be sourced from China.
“There’s a complicated array of issues arising from tariffs, and relocating to India doesn’t fully resolve them. It may help to some extent,” Moffett, a partner and senior managing director at MoffettNathanson, expressed on CNBC’s “Fast Money” on Friday. “I am skeptical about the execution of this plan.”
Moffett argues that transitioning to India won’t be straightforward, noting that Apple’s supply chain would remain primarily based in China and may encounter challenges.
“Ultimately, the global trade war presents a dual challenge, impacting both costs and sales. While moving assembly to India could potentially aid with the former, the latter issue might be of greater concern,” he stated in his memo.
On Monday, Moffett reduced his price target for Apple shares from $184 to $141, indicating a potential 33% decline from Friday’s closing price, marking the lowest estimate on Wall Street according to FactSet.
“I don’t see myself as the biggest pessimist regarding Apple,” he mentioned. “I hold Apple in high regard; my concerns relate more to valuation rather than the company itself.”
He’s maintained a “sell” rating on Apple since January 7, during which the company’s stock has seen a roughly 14% decrease.
“This isn’t due to Apple being a deficient company. They boast a robust balance sheet and a strong consumer base,” he added. “It’s simply the nature of the current market – as a product company facing steep tariffs, you’re moving into an environment that could slow consumer demand due to broader economic conditions.”
Moffett highlighted that Apple is not receiving support from its telecommunications partners to mitigate the impact of tariffs.
“There’s also the destruction of demand due to potentially increased prices. Remember, companies like AT&T, Verizon and T. Mobile this week announced they would not cover the extra costs of tariffs on handsets,” he noted. “So, consumers will bear those costs, resulting in reduced demand, leading to longer periods before upgrading and lower sales estimates for next year.”
Moffett also pointed out that rising anti-Apple sentiment in China, fueled by U.S. tariffs, will likely impact iPhone sales negatively.
“This is a significant issue,” he remarked. “Sales are shifting towards local competitors like Huawei and Vivo instead of Apple.”
Apple’s stock recently experienced a positive week, rising over 6%. This increase comes just before the company’s earnings report is scheduled for Thursday afternoon.
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