We’ve seen a sell-off in US equity markets in May amid the escalation in the US-China trade war. The US and China have increased tariffs on each other’s goods. The US has also imposed restrictions on Huawei. Last week, President Trump said that Huawei could be part of the US-China trade talks.
Looking at the markets, the SPDR S&P 500 ETF (SPY) has lost 3.8% in May. FAANG stocks have reacted differently to the trade rhetoric. Apple (AAPL) has been the biggest loss in the FAANG space in May with a fall of 10.5%. Several analysts have turned bearish on Apple. Analysts have lowered the stock’s target price. Apple is exposed to the US-China trade war due to its supply lines and its operations in China. Nomura Instinet has lowered Apple’s 2019 EPS estimate from $11.50 to $11.39. Goldman Sachs expects Apple’s earnings to fall 29% if China bans Apple products. Read Apple: Trade War Escalates, Brokerages Are Cautious to learn more.
Netflix (NFLX) has fallen the least among the FAANG stocks in May with a fall of 4.4%. Facebook (FB), Amazon (AMZN), and Alphabet (GOOG) have seen a downwards price action of 6.4%, 5.4%, and 4.6%, respectively, in May. Alphabet also got dragged into the US-China trade war after the Huawei episode. The company suspended some of its business with Huawei after the restrictions. Nomura Instinet expects that Alphabet could lose more than $400 million in revenues annually after the Huawei restrictions.
Netflix doesn’t have much exposure to China. As a result, the stock is relatively immune to the US-China trade war. Amazon (AMZN) could also see cost escalation if tariffs are imposed on consumer goods imports from China.