Apple (AAPL), Tesla (TSLA) Could be 'Collateral Damage' from Trump's TikTok War - Bernstein

August 11, 2020 7:14 AM EDT
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Bernstein tech analyst Toni Sacconaghi thinks Apple (NASDAQ: AAPL) or Tesla (NASDAQ: TSLA) could be collateral damage from Trump's executive orders on August 6 banning TikTok and WeChat.

Sacconaghi said while no direct measures have yet been announced, China "has a history of wide discretion in pressuring foreign companies, particularly in periods of geopolitical tension." He highlights state-backed customer boycotts and government disruption of foreign companies' sales, exports, or manufacturing. Precedents for this sort of behavior include the Chinese government's disruption of HP PC sales in 2010, regulatory delays on the iPhone 6 in 2014, the shutdown of iTunes Movies and iBooks in 2016, and government shutdowns of Korean supermarkets in 2016. The analyst also said China could potentially reintroduce its "Unreliable Entity List," which originally included Apple.

The analyst said Apple and Tesla are among the two most exposed companies in their coverage. Apple generates 15% of its revenues from China. Tesla traditionally generated 15%+ of its revenues in China, but is now targeting a 30%+ mix amid the recent construction of its Shanghai Gigafactory.

Sacconaghi said while it is difficult to handicap the exact risk of Chinese retribution to either Apple or Tesla, with both stocks trading at all-time-high multiples investors are not discounting much China risk currently.

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