Since the low of March 23, the rebound in Apple stock (NASDAQ 🙂 has been remarkable. The shares have since risen by more than 50% and have risen by about 10% for the year. The stock is currently trading at $ 318.89 and will outperform its all-time high of $ 327.20, which was reached on February 12, 2020, just before the pandemic hit the global economy.
As this broad market rally continues, the big question in the future is whether this bullish trend is sustainable and is it time to bet on Apple's shares for a long time? It may not be.
The risks for the maker of iPhones, personal computers, tablets and wearables are increasing. Perhaps the company's biggest challenge right now is to re-emerge the US-China trade dispute. The final blow to the already strained ties between the world's two largest economies came when President Donald Trump extended his efforts this month to curb Huawei Technologies' access to the U.S. market and U.S. suppliers.
Trump extended a national emergency order for a year, which prevents Huawei and a second Chinese telecommunications company, ZTE Corp (HK :), from selling their equipment in the United States
The United States Department of Commerce later expanded its so-called entity list, which restricts access to American technology and other items, to 24 Chinese companies and universities. The U.S.-China relationship has deteriorated dramatically in recent months when Trump blamed China for mishandling the corona virus pandemic that has killed about 100,000 people in the U.S. and shut down the economy so far.
Unreliable Entities
Hu Xijin, the influential editor of the Global Times, who has close ties to the Chinese government, has warned in a tweet that China Apple, Qualcomm (NASDAQ 🙂 and Cisco (NASDAQ 🙂 may explain. , as untrustworthy entities and stop buying Boeing (NYSE 🙂 aircraft.
Chinese Foreign Minister Wang Yi said on Sunday that the US was pushing relations towards a "new Cold War" as US politicians condemned Beijing after the latest attempt to impose a national security law on Hong Kong.
Since Apple has built up a large network of suppliers in China in recent years to reduce costs, it has become one of the most exposed stocks in the Asian country. The technology giant, based in Cupertino, California, employs an estimated two million people in Apple's supply chain, in addition to a similar number of technical staff engaged in Apple app development. The company designs and markets most of its products in the United States, but imports them from China after assembly.
Aside from the risk in China, some analysts also question whether the technology giant will recover quickly from the pandemic slump.
Goldman Sachs has lowered Apple to neutral in a recent post as iPhone demand declines the longer users hang on the phone and services growth stagnates. The company also sees a persistent effect on prices, with Apple no longer able to charge for smartphones.
Analyst Rod Hall said he was concerned about a delay in the launch of a 5G iPhone, which has been touted as one of the key growth drivers for the future. "Limited global travel at this critical point in Apple's final engineering and manufacturing process for the 2020 iPhone for iPhone could lead to a delayed launch this year," he said.
When announcing last month, Apple did not forecast for the first time in more than a decade because of the persistent complications of COVID-19.
Bottom Line
The coming days will be critical to the sustainability of the rally in Apple stock as investors begin to take into account their expectations for the severity of the Chinese risk. Shares underperformed last year at the height of the trade war, and that may again be the case as tensions between the two economic powers escalate.
