December 26th turned out to be a big day for Apple (NASDAQ:AAPL) and AAPL investors. After months of being punished, Apple stock gained over 7% on December 26, its biggest single-day win in years. All the FAANG stocks rebounded on Boxing Day, so this was part of a bigger trend. However, AAPL also had big news that may have helped, after a report broke that Apple and manufacturing partner Foxconn will begin assembling flagship X-series iPhones in India.
Apple Stock Has a Big Day
AAPL investors have had a rough ride over the past few months, and it’s mostly been downhill. An escalating trade war with China and the threat of tariffs have hit Apple stock. Worse, the company is seeing slowing iPhone sales as the world demand for the devices that make up Apple’s primary source of revenue slows. That situation hit a boiling point in November, when AAPL reported Q4 earnings and announced it would no longer release iPhone unit sales numbers.
Predictably, Apple stock got punished over that news. In all, investors have watched 35% of AAPL’s value wiped out since it hit record highs at the start of October. It lost its trillion dollar market cap, and then was surpassed by Microsoft (NASDAQ:MSFT) as the world’s most valuable company.
But on Boxing Day, there was a big rebound. All of the FAANG stocks saw a bounce after several months of being hit by a seemingly endless parade of concerns. And Apple stock was riding that wave, posting a 7.04% gain. That’s its best single-session performance in five years.
The Big News About India
AAPL’s gains were largely attributable to investors taking a more bearish look at FAANG stocks in general. However, there was also big news on the 26th that may have helped give a boost to Apple stock. Reuters published an exclusive scoop claiming that Apple and Foxconn will begin to assemble the flagship iPhone X series smartphones in India. Foxconn will reportedly invest $356 million to expand its factory in that country.
Details are still scant at this point. In particular, it’s not known if the Foxconn plant would be taking over some of the iPhone X production from its Chinese facilities. That being said, this could be very big news for AAPL investors.
For one thing, Apple’s iPhone sales in India –the world’s second largest smartphone market (after China) and a region that still has room for growth– have been terrible. Manufacturing the iPhone X series in India isn’t going to address the issue of price sensitivity, but it will at least mean the company can sell its flagship smartphones in this market with a “Made in India” label, avoiding punishing taxes that make them even less affordable.
If it turns out that Foxconn is able to divert some of its Chinese production to India — and remember, that’s a big “if” that has not been confirmed — this move could also help Apple to avoid tariffs levied on the iPhone X. If the U.S. goes ahead with threats to impose tariffs on iPhones that are assembled in China, moving production of iPhone X models destined for the U.S. market to India could mean AAPL escapes having to eat those additional costs.
Given the price sensitivity of Indian consumers, it seems plausible that a significant chunk of Foxconn’s Indian production would be available to ship to other markets — namely the United States.
Regardless of whether the iPhone X units from the Foxconn plant end up selling in India or shipping to the U.S., the flexibility is good news for AAPL with upside for Apple stock. It’s just possible that the 7% gain on Boxing Day is the start of an Apple recovery…
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.