Apple Inc. (NASDAQ:AAPL) may encounter difficulties in the second half of the year due to its elevated valuation and increasing concerns related to China, according to JPMorgan Chase & Co. This could overshadow the excitement surrounding an upcoming product launch next week.
In a note released on Friday, analysts led by Samik Chatterjee reduced their price target for the world’s largest company from $235 per share to $230. They expressed concerns about China’s crackdown on iPhone usage, coinciding with rising competition in Apple’s most significant foreign market. Huawei Technologies Inc. recently unveiled its flagship model, the Mate 60 Pro, in this market.
The analysts noted, “The restrictions will make it tougher for Apple to continue gaining market share in the local market.”
However, they believe that China’s plan to expand the ban on iPhone use among government and state company employees is unlikely to significantly impact sales, as previous restrictions haven’t substantially altered consumer behavior.
On Friday, Apple shares experienced a 1% increase following a two-day decline that erased nearly $200 billion of the company’s market value.
Citigroup Inc. also expressed concerns about Apple’s stock performance, removing a 90-day upside catalyst watch on the stock. Analysts led by Atif Malik stated, “We view the recent news regarding China and the Huawei Mate 60 launch as headline risks for the stock.”
JPMorgan emphasized that Apple’s stock performance for the remainder of the year will heavily rely on the success of its iPhone 15 launch next week. However, even if investors become more optimistic about iPhone sales following the event, analysts believe that the shares’ potential upside will be limited by the stock’s 38% rally earlier in the year. Additionally, they pointed out that Apple’s high valuation multiple, trading at 27 times forward one-year earnings, represents a 16% premium compared to its five-year average.
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