Bernstein skeptical that Apple (AAPL) India will follow China growth

Bernstein analyst Toni Sacconaghi is skeptical that Apple's (NASDAQ: AAPL) business in India will necessarily follow China's growth trajectory.

The analyst told investors in a note Monday that Apple's revenues in emerging markets have been relatively flat as a percentage of total company revenues for the last decade.

"Moreover, when compared with other consumer/luxury brands, Apple's revenue percentage in these geographies appears middle of the pack, and accordingly does not point to any obvious structural under-penetration," said Sacconaghi, who has a Market-Perform rating and $175 price target on Apple shares.

"The bull case - of course - is that India becomes the next China for Apple. If so, our analysis suggests that India could grow 40%+ annually and add 200 bps+ to annual iPhone unit growth and company revenue growth over the next five years," the analyst added. "That said, we are skeptical that Apple's business in India will necessarily follow China's growth trajectory."

He added that even beyond its GDP growth story, China has been disproportionately important to Apple and to premium/luxury consumer brands, which was already true in 2009 when China was at a similar stage of development to India today.

"Furthermore, economists are quick to caution that sustained 7%-9% economic growth in India may be more difficult to achieve than occurred in China, given (1) a less centrally planned and business-friendly economy; (2) accompanying low manufacturing jobs (11% vs. 28 in China); and (3) very low employment among women (24% vs. 61% in China)," concluded Sacconaghi.

Apple shares are down almost 1% so far on Monday. Goldman Sachs said in a note that the tech giant's hAR/VR headset can succeed where others haven't, while Loop Capital downgraded the stock to Hold due to macro pressures.

By Sam Boughedda

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