Apple's China business might have benefited from trade war: Goldman Sachs

The U.S.-China trade war might have provided an unexpected boost to Apple’s fourth-quarter results.

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The Cupertino, Calif.-based company announced Wednesday evening that it earned $13.69 billion, or $3.03 a share, during its fiscal fourth quarter as revenue rose 18 percent from a year earlier to $64 billion. Shares rallied following the report.

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AAPLAPPLE INC.263.19-3.10-1.16%

Apple raked in $11.1 billion of revenue from the Greater China region amid strong demand for its iPhone 11, which was on sale for 11 days during the three-month period ending in September. Double-digit services growth and strong wearables performance also helped.

New York-based Goldman Sachs analysts, led by Rod Hall, say sales in China are being “helped by some pull-forward” before the U.S. slaps tariffs on $160 billion of Chinese goods on Dec. 15.

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Chinese consumers may be “anticipating local retaliation” through a sales tax or another form of revenge that might drive prices higher if they don't make purchases now.

After the note was released on Friday morning, a Bloomberg report, citing people familiar with the matter, said Beijing was hesitant to give in on some of the biggest stumbling blocks to trade between China and the U.S. due to President Trump’s unpredictability and the possibility he could back out of any deal.

Earlier this month, the two countries agreed to the framework of a “phase one” trade agreement that is said to include Beijing making concessions on intellectual property rules, financial services and agriculture. In return, the U.S. agreed not to raise existing duties on $250 billion goods from 25 percent to 30 percent on Oct. 15.

The two sides had moved close to a deal earlier this year when Beijing reneged.

Goldman called Apple’s report “positive,” but said the stock appears to be trading on expectations of "a strong product cycle at the end of 2020 --  before 2019 is over.”

Hall’s team raised its price target to $188 a share, from $165, but that’s almost 25 percent below where shares were trading on Thursday.

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Wall Street as a whole is much more optimistic than Goldman. A Refinitiv survey out ahead of the report showed the Street’s average 12-month price target was $234 a share.

Morgan Stanley is one of the more bullish shops on Wall Street. Analyst Katy Huberty’s team raised its price target to $296, citing strong iPhone, wearables and services results, and said the stock was its “top pick” for 2020.

Apple shares have climbed 54 percent this year.

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