Club holding Apple (AAPL) isn’t in danger of losing its footing, despite a recent market sell-off spurred by reports China is cracking down on iPhone usage. We feel the same way about two other China-tied Club stocks that also felt the heat this week. The Chinese government is moving to bar state employees from using iPhones or other foreign-branded devices at work, The Wall Street Journal reported Wednesday. Bloomberg confirmed the story Thursday, adding that restrictions could be extended to millions more at state-backed firms. Although Beijing has previously enforced restrictions on iPhone usage, the reported new rules signal a more concerted effort to sever China’s dependence on Western technology. The news triggered a selling frenzy this week, with Apple losing over $200 billion in market value . The stock stabilized Friday, trading around $178 a share. Still, Apple remains an “own-it don’t-trade it” stock in the Club portfolio, as its standing as an aspirational brand in China shouldn’t be affected by the government’s apparent decision. “These companies don’t become mega cap companies because they’re just idiots,” Jim Cramer said Friday, referring to the resilience and strong leadership of a tech giant like Apple. Apple CEO Tim Cook “isn’t just riding around saying, ‘Boy, I sure hope China doesn’t cut us off.’ The man’s got a game plan for a lot of different things,” Cramer added. Meanwhile, two other Club names with ties to both Apple and China — semiconductor firm Broadcom (AVGO) and materials manufacturer DuPont de Nemours (DD) — felt the knock-on effects of this week’s news, with their stocks under pressure. AAPL YTD mountain Apple (AAPL) year-to-date performance Apple The iPhone maker benefits from significant brand loyalty in China, which should offset any nationalist policies pushed by Beijing, according to Jim. Apple is likely to remain a premium brand for Chinese consumers. Moreover, the iPhone maker is a key contributor to China’s economy, employing millions of people throughout the country. But if China were to confirm the new rules targeting iPhones, Apple is well-positioned to weather any near-term headwinds. Perhaps most notably, Apple has already been reducing its reliance on China by expanding into emerging markets like India in an effort to diversify its supply chain and capture market share in the world’s most populous country. Overall, we share Morgan Stanley’s view that these headlines are “more bark than bite,” as the firm wrote in a research note Friday. Morgan Stanley pointed out that even if Apple were to give back all the market share it gained from Chinese competitor Huawei over the past three years, the hit to revenues and earnings-per-share would only be about 4% and 3%, respectively. This downside case is quite manageable for a company like Apple with a huge balance sheet and ability to reinvent itself through new products and services. Broadcom, DuPont Broadcom earns roughly 20% of its revenues from its wireless segment and its main customer is Apple, making the semiconductor firm a prime selling target this week. But we remain upbeat on the name for its artificial-intelligence potential. Truist on Friday, citing Broadcom’s accelerating AI revenues, raised its price target on the stock to $995 a share, up from $942, while reiterating a buy rating. And what also makes Broadcom a differentiated investment within the semiconductor space is its steadily growing dividend payment, M & A track record, and stock-buyback potential — all at a reasonable price-to-earnings multiple. Meanwhile, DuPont was also a casualty this week. The company provides materials to support the manufacturing process for a myriad of electronics, including smartphones. But it also serves numerous smartphone customers beyond Apple, and should see steady growth once it moves past the inventory glut that has plagued the business for the past year. (Jim Cramer’s Charitable Trust is long AAPL, AVGO, DD. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Apple opened its 54th flagship store in Greater China in the city of Wuhan in May. The iPhone company warned in late April that supply chain disruptions from China’s Covid controls would likely hurt sales in the current quarter by $4 billion to $8 billion.
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Club holding Apple (AAPL) isn’t in danger of losing its footing, despite a recent market sell-off spurred by reports China is cracking down on iPhone usage. We feel the same way about two other China-tied Club stocks that also felt the heat this week.
