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Investing.com -- Apple’s challenges in China continue to mount, with MoffettNathanson highlighting a mix of competitive pressure, structural market issues, and nationalism as key factors behind the company’s declining market share.
“Even before Apple (NASDAQ:AAPL) reported its steep 11% YoY decline in Greater China revenue in their FY First Quarter, investors had grown worried,” the firm wrote.
Apple’s troubles became more evident after research from Counterpoint suggested the company had fallen to third place in the Chinese smartphone market.
MoffettNathanson said that this shift has raised “troubling questions” about Apple’s long-term competitive position in China.
A recent AI partnership with Alibaba (NYSE:BABA) initially boosted investor sentiment, but analysts remain skeptical about its ability to reverse Apple’s trajectory in China.
“Will that solve the China Problem?” the firm asked. “Alas, our analysis leads us to conclude that the combination of quality improvements by Huawei and others, a market structurally less amenable to the lure of Apple’s integrated ecosystem, and good old-fashioned nationalism, has chipped away at Apple’s position in China.”
MoffettNathanson sees no quick fix to these headwinds. “It’s difficult to see how any of those factors snap back in a meaningful way, or on what timeline,” the firm wrote, adding that bringing on a local AI partner won’t solve Apple’s core issues.
According to the analysts, the broader concern is that Apple’s valuation is heavily tied to expectations of an AI-driven iPhone ‘Super Cycle,’ which may not fully materialize without China.
“Without Greater China, Apple’s second-largest market, that simply can’t happen,” the firm cautioned.
MoffettNathanson reiterated its Sell rating on Apple and lowered its price target to $184 per share.