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Would Market Slowdown in China Impact iPhone Sales Significantly?

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Goldman Sachs is cautious about China’s smartphone market

Analyst Rod Hall from Goldman Sachs (GS) has raised concerns over a slowdown in China’s (FXI) iPhone market. A slowdown in China would likely have a negative impact on Apple’s revenue over the next few quarters. China remains important for Apple and accounts for around 20% of total revenue for the company. According to Hall, China is in the middle of a rapidly slowing smartphone market and has estimated product sales to decline 15% year-over-year, which could result in a drastic fall in Apple’s (AAPL) revenue from China.

Hall stated, “Much of Apple’s upside potential in our [previous report] was centered on Chinese demand for larger screen sizes. Should weak consumer demand persist and impact the higher end of the market Apple’s potential to beat and raise in FQ4’18 earnings is likely reduced.”

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Kuo remains unconcerned

In the previous article, we saw that analyst Ming-Chi Kuo raised his Apple iPhone estimates for the first quarter of fiscal 2019 to 83 million units. According to Kuo, Apple will largely be immune to the smartphone decline driven by the introduction of new models as well as technology improvements.

According to Hall, Apple’s iPhone will sell 80 million units during the holiday quarter. China is estimated to account for 16% of total sales, a decline of 19% YoY (year-over-year). Hall reiterated a “hold” rating for Apple with a 12-month price target of $240.

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