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“Supply chain checks the past few weeks have yet to show any negative inflection.” — Analyst Tim Arcuri

From a note to clients that landed on my desktop Friday:

Month of May datapoint will be more important. One of the reasons Apple CEO cited for China improvement was increased consumer confidence due to easing of US-China trade tensions. However, in recent days, trade tensions have escalated and it bears watching whether this affects China consumer sentiment; supply chain checks the past few weeks have yet to show any negative inflection. China remains an important driver, but we note overall iPhone replacement cycle is ~3 years (on the portion of the iPhone base that is first-hand units), suggesting that units have reached some asymptotic floor barring further extension and or trade- related impact. Separately, services should see easier compare starting in the Sept Q.

China iPhones down 3% YoY in April vs. 66% average of the prior four months. Analysis of monthly government smartphone sell-through data from China suggests the annual rate of decline for Apple iPhones in the month of Apr improved materially (dn 3% YoY vs. 61% in March). This improvement was driven by overall market strength (China smartphones were up 6% after declining in 9 of the prior 10 months) as well as slightly easier comps. This is consistent with CEO commentary on the earnings call and partially the driver for slightly better revenue guidance. It still appears, though, that the overall China smartphone market remains a little stronger than Apple (29% month- over-month growth compared to 19% for Apple) and Apple may have lost a little more share, though it is hard to read into monthly data as there are seasonal factors.

Maintains Buy rating and $235 price target. 

My take: Arcuri is one of those analysts who likes to keep his 12-month price target just above the water line. So far he’s holding pat. See UBS Apple price target chart below:

Click to enlarge.