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(C) Reuters. Apple could lose ~20M iPhone shipments in 2024 due to China ban, Huawei competition – analysts

Nasdaq 100 futures declined 0.5% in early New York trade on Thursday as Apple (NASDAQ:AAPL) stock selloff continued for the second consecutive day.

Shares in the tech behemoth fell 3.6% yesterday on the WSJ report that China is expanding its ban on iPhones to state-owned firms and government agencies.

Apple stock is down a further 2.7% in premarket Thursday.

China Government Ban

The situation in China has developed as the government ordered officials at central government agencies not to use iPhones and other foreign-branded devices for work or bring them into the office. These instructions were reportedly communicated to staff by their superiors in workplace chat groups or meetings, the WSJ report noted.

The potential expansion of the iPhone ban in China could have significant implications for foreign brands operating in the country, including Apple.

China is crucial for Apple, and the company relies on this market for approximately 19% of its overall revenue.

“China accounts for roughly 40-50mn iPhone units for Apple. We estimate up to a 5mn to 10mn-unit headwind if such a ban were to go through and subsequently be enforced. Additionally, if iPhones are banned from being carried into official workplaces (the Journal article suggests this as well), the impact could be higher given the high propensity of Chinese consumers to own and carry multiple phones,” BofA analysts wrote in a client note.

“We estimate that every 1mn iPhones translates to about a penny in EPS. The prior foreign branded laptop ban announced in 2022 allowed for a 2-year time frame to comply. It remains unclear what the timing of this potential ban would be.”

Increased competition

Moreover, Apple’s China rival Huawei introduced a new smartphone capable of ultrafast data connectivity. This, in addition to the government ban, could weigh on Apple’s iPhone sales in China.

“The government ban and the new Huawei phone will be material events for the iPhone,” said analysts at Oppenheimer. “The two combined will drive more Android users to upgrade to the Huawei, or iPhone users going back to Huawei.”

According to the analysts, Apple could lose 10 million iPhone shipments in 2024 because of the new Huawei phone. Coupled with lost shipments due to the government ban in China, Apple could be looking at 15-20 million in lost iPhone shipments for the next year.

The launch of the Mate 60 Pro, priced at $960 for presale, comes just a few days before Apple is scheduled to release its iPhone 15 lineup.

BofA analysts added that the timing of the potential ban is “interesting” as it coincides with the launch of Huawei’s new high-end smartphone.

(C) Reuters

Investing.com — Stocks tumbled on Wednesday as a combination of rising oil prices and rising interest rate fears weighed on markets.

While futures traders are betting on the Federal Reserve to hold steady on interest rates when it meets later this month, rising oil prices after extended production cuts by Saudi Arabia and Russia stoked concerns about the cost of energy and its effect on inflation.

This is as the Beige Book survey by the Fed found that inflation was easing as the growth in the price of goods slowed, and consumers have turned to borrowing to support their spending.

Heading into the fall, though, futures markets are about evenly divided on whether the Fed will raise rates in November.

Fed officials will be speaking in the next week or so and could provide hints on their thinking heading into the meeting. Boston Fed President Susan Collins said this phase of monetary policy calls for patience and holistic data dependence.

Here are three things that could affect markets tomorrow:

1. Jobless claims

The Fed has been closely watching the labor market for signs that the tight conditions are easing, something it wants to see to prove its inflation fighting efforts are working. New jobless claims for last week, due out at 8:30 ET (12:30 GMT) are expected to rise to 235,000 from 228,000 the prior week.

2. DocuSign earnings

Pandemic darling DocuSign Inc (NASDAQ:DOCU) is expected to report earnings per share of 65 cents on revenue of $677.5 million.

3. Designer Brands reports

Designer Brands Inc (NYSE:DBI) is expected to report earnings per share of 43 cents on revenue of $787.9 million.

(C) Reuters.

Investing.com – European stock markets weakened Thursday, with sentiment hit by fresh signs of slowing growth, both locally and in China, as well as worries about future Federal Reserve tightening.

At 03:15 ET (07:15 GMT), the DAX index in Germany traded 0.3% lower, the FTSE 100 in the U.K. fell 0.3% and the CAC 40 in France dropped 0.1%.

German industrial production weakens further

German industrial production fell 0.8% on the month in July, more than the expected 0.5% drop, data showed earlier Thursday, adding to the previous month’s revised 1.4% fall.

This adds to a series of data releases that show the eurozone’s largest economy, and major regional growth driver, is struggling, and threatening to slip back into recession.

The latest estimate of eurozone growth in the second quarter is due out later in the session, and the gross domestic production figure is expected to show the region grew just 0.3% on the quarter, annual growth of 0.6%.

But economic woes are not confined to Europe.

China’s exports and imports fell in August, data showed on Thursday, with exports dropping 8.8% year-on-year and imports contracting 7.3%.

While the trade numbers beat expectations, they show China’s manufacturing sector remains under significant pressure and that policymakers will need to focus on boosting domestic demand to shore up growth.

China is a major market for Europe’s largest companies, and its faltering recovery continues to weigh on their bottom lines.

U.S. inflation worries weigh

Across the Atlantic, stronger-than-expected U.S. service sector data, released on Wednesday, pushed up concerns over sticky inflation.

Investors had just grown comfortable with the idea that inflation was retreating in the U.S., allowing the Federal Reserve to pause its rate-hiking cycle and the U.S. economy to avoid a dramatic slowdown.

There are a number of Fed officials due to speak later Thursday at a fintech conference hosted by the Philly Fed, before they soon enter the blackout period ahead of their meeting later this month.

Nestle moves into Brazilian chocolate market

Back in the European corporate sector, Nestle (SIX:NESN) stock rose 0.4% after the Swiss food giant announced that it is buying a majority stake in Brazilian premium chocolate maker Grupo CRM, with the deal expected to close in 2024.

Grupo CRM has more than 1,000 chocolate boutiques under the Kopenhagen and Brasil Cacau brands and a strong, growing online presence, Nestle said.

SAP (ETR:SAPG) stock fell 0.3% after the German business software maker said it has bought software management company LeanIX from investors.

Crude weakens on weak Chinese trade data

Oil prices fell Thursday, edging back from 10-month peaks as more signs of slowing Chinese growth overshadowed another draw in U.S. inventories, signaling tightening supplies.

The weak trade figures suggest the second biggest economy in the world, and largest crude importer, is at risk of missing Beijing’s annual growth target of about 5%.

Data released late Wednesday by the industry body American Petroleum Institute showed U.S. crude inventories fell for a fourth straight week, dropping 5.5 million barrels in the week ending Sept. 1.

The reading usually acts as a precursor to inventory data from the Energy Information Administration, which is due later in the day.

By 03:15 ET, the U.S. crude futures traded 0.4% lower at $87.19 a barrel, while the Brent contract dropped 0.4% to $90.27.

Additionally, gold futures fell 0.1% to $1,942.25/oz, while EUR/USD traded 0.1% lower at 1.0716.

(C) Reuters.

By Davit Kirakosyan

Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: upgrades at Lowe’s, First Solar, Toast , Constellation Brands, and Semtech.

InvestingPro subscribers got this news first. Never miss another market-moving headline.

Stifel initiated Lowe’s at Buy

Late Wednesday, Stifel started coverage on Lowe’s (NYSE:LOW) with a Buy rating and a $270 price target.

The analysts say they believe “the current discount to retail peers undervalues the medium-term growth prospects,” noting that their outlook for a 10% compound annual growth rate (CAGR) on Lowe’s EPS comes in just above consensus.

Stifel also noted that Lowe’s is “in the late innings of executing its Total Home Strategy” – an offering of products and services for pros and consumers – “with the successful performance from 2018-2022 validating the effort.”

The analysts also see the company’s overall footprint as an advantage for the company, particularly in terms of its rural exposure. They added:

“Against our tempered view of the 2024 recovery, we believe Lowe’s ability to fully realize the fruits of its efforts should enable a stronger in-market performance supportive of our 2.2% comparable sales growth outlook, the low end of the implied trajectory to achieve $520 per-square foot.”

The new buy rating closely follows Bernstein’s Tuesday upgrade of Lowe’s to Outperform on expected expansion in the company’s operating margins over the coming two years, as well as its “unequivocal” bullishness on the macro-level long-term drivers of home-improvement spending.

Lowe’s shares were ticking marginally higher to $229.66 in recent premarket trading.

First Solar upgraded at Morgan Stanley

Morgan Stanley upgraded First Solar (NASDAQ:FSLR) to Equalweight from Underweight and raised its price target to $206.00 from $180.00, as reported in real-time on InvestingPro.

The firm “continues to see long-term risk to FSLR’s margin profile,” with competition among domestic solar panel manufacturers increasing. However, they acknowledge that “the company’s substantial 77.8 GW backlog de-risks its earnings profile through 2026.” They believe this warrants a premium multiple compared to its peers.

Furthermore, the firm believes there is a limited risk of backlog contract cancelations due to the company’s deposit requirements and the lack of near-term alternatives for solar panels.

Toast raised to Buy at UBS

UBS upgraded Toast (NYSE:TOST) to Buy from Neutral and raised its price target to $30.00 from $25.00.

The firm sees improved potential for quarterly net new location additions and expects margin expansion. Toast is well-positioned to take advantage of the restaurant industry’s shift away from legacy technology toward integrated omni-channel software solutions.

Despite intense competition and macroeconomic uncertainties, UBS mentioned that the company has demonstrated its leadership in this space, evident in its recent uptick in net location additions. The firm also noted that they see limited risk from the appointment of Aman Narang as Toast’s new CEO, “given his strategic leadership roles at Toast.”

Two more upgrades

TD Cowen upgraded Constellation Brands (NYSE:STZ) to Outperform from Market Perform and raised its price target to $300.00 from $240.00.

TD Cowen declared that the company is “set to sizzle” and that the firm is constructive on several factors for STZ.

We are constructive on: 1) accelerating beer growth in Nielsen-tracked channels, which de-risks margins, 2) the success of Modelo Oro in particular, 3) re-accelerating earnings growth on better beer growth and deleverage, and 4) the potential for larger shareholder returns with a wine/spirits sale.

Needham & Company upgraded Semtech (NASDAQ:SMTC) to Buy from Hold with a price target of $35.00, ahead of the company’s Q2/24 earnings announcement today after the market close.

The firm’s decision to upgrade is not solely based on short-term factors. They acknowledge the potential for near-term results to be affected by weak demand in end markets and inventory adjustments in the IoT and telecom markets.

However, we believe Thursday’s earnings call presents an opportunity for incoming CEO, Paul Pickle, to present a new long-term operating model with earnings power well above Street estimates and highlight potential divestiture opportunities to raise cash and pay down debt.

Get ready to supercharge your investment strategy with our exclusive discounts.

Don’t miss out on this limited-time opportunity to access cutting-edge tools, real-time market analysis, and expert insights. Join InvestingPro today and unlock your investing potential. Hurry, the Summer Sale won’t last forever!

(C) Reuters.

Investing.com — U.S. stock futures pointed to a mixed open for equities on Wall Street, as investors examine how recent services sector data and a closely-watched Federal Reserve survey could impact the central bank’s monetary policy. Elsewhere, China’s exports contract in August in a sign of mounting pressure on the manufacturing industry in the world’s second biggest economy, while a report that Beijing is barring government officials from using iPhones at work weighed on Apple (NASDAQ:AAPL) shares.

1. Futures mixed following Wednesday slide

U.S. stock futures were mixed on Thursday after stronger-than-anticipated U.S. services sector data sent Treasury yields higher and weighed on equities in the prior session.

At 05:40 ET (09:40 GMT), the Dow futures contract added 41 points or 0.1%, the S&P 500 contract lost 9 points or 0.2%, and Nasdaq 100 futures dipped by 87 points or 0.6%.

Monthly data from the Institute for Supply Management (ISM) on Wednesday showed that activity in the U.S. services industry — which makes up more than two-thirds of the American economy — unexpectedly accelerated in August, hitting a six-month high. Input costs paid by these businesses also rose.

The numbers suggested that consumer demand is shrugging off a recent spike in interest rates — a resilience that analysts at ING posited could be linked to a summer of popular concerts and movies. After the release of the figures, yields in both two- and ten-year U.S. government bonds climbed, while all three of the major indices on Wall Street declined.

2. Fed survey points to modest economic growth

The services data fueled some bets that the Federal Reserve may choose to hike interest rates later this year to stamp out the stubborn final embers of last year’s surge in price gains.

According to Investing.com’s Fed Rate Monitor Tool, the probability that America’s central bank will choose to raise rates at its November meeting now stands at 43.6%, up from 39.3% in the prior day.

Investors, however, are still largely pricing in the chance that the Fed will keep borrowing costs steady at a range of 5.25% to 5.50% for the remainder of 2023. The predictions were largely supported by a Fed survey on Wednesday that pointed to modest growth and cooling inflation in the world’s biggest economy in July and August.

The so-called “Beige Book” summary bolstered expectations that, even accounting for the expanding services industry, Fed policymakers were either done or wrapping up their long-standing tightening campaign.

More clues about the path ahead for rates may come on Thursday from a fintech conference where a number of Fed officials are due to speak.

3. Crude slips on weak Chinese trade data

Oil prices fell Thursday, climbing down from 10-month peaks as more signs of slowing Chinese growth overshadowed another draw in U.S. inventories that hinted at tightening supplies.

Weak trade figures out of China were seen as a signal that the world’s largest crude importer is at risk of missing Beijing’s annual growth target of about 5% (see below).

Meanwhile, data released late Wednesday by the industry body American Petroleum Institute showed U.S. crude inventories fell for a fourth straight week, dropping 5.5 million barrels in the week ending Sept. 1. The reading usually acts as a precursor to inventory data from the Energy Information Administration, which is due later in the day.

By 05:40 ET, the U.S. crude futures traded 0.8% lower at $86.83 a barrel, while the Brent contract dropped 0.8% to $89.92.

4. Chinese exports slump

China’s exports dropped by 8.8% annually in August, while imports contracted by 7.3%, in a fresh sign of the significant pressure on the country’s crucial manufacturing sector.

Although the trade numbers on Thursday topped estimates, they still indicate that government policymakers may need to do more to help shore up China’s sputtering post-pandemic recovery.

Along with flagging exports, China’s economy has been hit by a liquidity crisis in its property sector. Officials in Beijing have rolled out a series of smaller measures aimed at buttressing growth, but have yet to launch a wide-scale stimulus program.

Yet the woes were not confined to Asia. Industrial production in Germany fell by more than anticipated in July, exacerbating concerns that the eurozone’s largest economy and major regional growth driver may be about to slip back into recession.

5. China bars government officials from using iPhones at work – WSJ

Shares in Apple decreased by just under 3.6% on Wednesday after the Wall Street Journal reported that China has banned government officials from using the tech giant’s popular iPhone and other foreign-branded devices for work.

Citing unnamed people familiar with the matter, the paper said the order, which also prohibits government workers from bringing these smartphones into the office, had been handed down in recent weeks. It was not immediately clear how widely the directives were being distributed, the WSJ noted.

Traders seemingly took the report as a potential indication that China may be willing to reduce its reliance on American companies in its bid to boost domestic players. This could prove to be a blow to Apple’s business in China, which generates almost a fifth of the firm’s total revenue.