Analysts: Bet on Apple Because of China and Wearables

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Source: Thinkstock

Source: Thinkstock

It’s been a tepid couple of months for Apple (NASDAQ:AAPL). Ahead of a post-market earnings announcement on April 23, shares of the tech giant were down nearly 4 percent year to date and up just 1.3 percent over the past six-month period. Analyst sentiment since the new year began has generally been more pessimistic (apathetic, at least) than optimistic — something that is ostensibly captured in below-average holding of Apple stock by top institutional owners.

In a recent research note, analysts at Piper Jaffray contributed their two cents. The note suggests that there is some slack in used pricing in China (relative to the United States) that isn’t exactly encouraging. According to data gathered from eBay and Taobao, used iPhone prices are down 3 percent in the U.S. and down 15 percent in China. In China, the iPhone 5 is selling for 82 percent of retail price, the iPhone 5S is selling for 67 percent of retail, and the iPhone 5C is selling at 56 percent of retail. This compares against 78 percent, 75 percent, and 59 percent, respectively, in the U.S. This difference, the analysts wrote, “was driven by the ramp in smart phone competition in the past year from players like Huawei.”

But overall, the note says, “we remain positive on the iPhone opportunity in China given the China Mobile ramp in 2014.” The analysts added that they “see the growth potential in China Mobile as outweighing the negative trend in China used pricing driven by competition.”

Apple’s flagship smartphone became available on China Mobile (NYSE:CHL), the world’s largest wireless carrier, in January. In February, China Mobile CEO Li Yue told The Wall Street Journal that the carrier added approximately 1 million new iPhone users. Piper Jaffray analyst Gene Munster is expecting 3 million China Mobile iPhone units sold in the March quarter.

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