No turnaround for Apple in China due to smartphone ‘saturation:’ UBS

No turnaround for Apple in China due to smartphone ‘saturation:’ UBS

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A Chinese woman reacts while setting up the facial recognition feature on her iPhone X inside an Apple showroom in Beijing on November 3, 2017.

Apple’s iPhone sales in China will not return to their peak levels anytime soon, according to one Wall Street analyst.

UBS predicts Apple’s iPhone sales growth in China will be roughly flat this fiscal year because consumers are waiting longer to upgrade to new phones and there is rising local competition.

“We think it’s doubtful China returns to its 2015 peak as local brands have caught up and upgrade cycles are lengthening,” analyst Steven Milunovich wrote in a note to clients Monday. “Although industry experts see aspirational buying patterns, the market as a whole has begun to slow due to saturation and lengthening upgrade cycles. Our experts agreed that upgrade cycles started to lengthen in 2017 and will continue to do so in 2018.”

The analyst said Apple’s China sales peaked in 2015, when the country represented 25 percent of iPhone shipments versus 19 percent today.

“We expect a flattish market, give or take a few points of growth depending on the overall market and product cycle,” he wrote. “There will be continued pressure from local competitors that have become adept at quickly replicating features.”

Despite the company’s growth issues in China, the analyst reiterated his buy rating and $190 price target for Apple shares. He cited the company’s price-to-earnings ratio of 16 times for this fiscal year, which compares favorably to other technology hardware stocks.

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