Entering text into the input field will update the search result below

Apple: India Is The Future After The Normal Economy Returns

Jun. 02, 2020 1:39 PM ETApple Inc. (AAPL)SSNLF58 Comments


  • Apple has a huge potential growth avenue in India with the current ability to reasonably sell 15 million units.
  • A return to a normal global economy is key to the investment thesis over the next year.
  • My estimate is for a FY21 EPS boost to $17, making the $320 stock reasonably priced at 18.8x this target.
  • Looking for a portfolio of ideas like this one? Members of DIY Value Investing get exclusive access to our model portfolio. Get started today »

As Apple (NASDAQ:AAPL) continues to struggle to grow in China due to government pressures, India is now opening as an option for huge growth over the next decade. The Indian government now appears far more friendly to the tech giant. My investment thesis isn't as bullish on the stock after the rebound to $320, but Apple remains a long-term buy on international growth and margin expansion.

Image Source: Apple website

Moving Into India

In the last few years, Apple has seen a decline in Chinese sales as the governments of the two countries battle over economic regulations. The one country offering the ability to replace stalling sales in China is India.

Apple just released the ability of Indian consumers to order customizable Macs and the company plans to open a retail store in 2021. The added sales capabilities in the Asian country should finally turn India into a growth driver for the tech giant.

Technically, India is the fifth largest economy now with a GDP of $2.65 trillion. The country has a GDP higher than the United Kingdom and France now. The per capita data, though, is still troubling for actual sales. Indian's only have an annual income of $1,980 in comparison to $39,532 in the U.K. while China consumers are up at $8,612.

Source: Worldometer

Clearly, the average consumer in India can't afford a normal $1,000 iPhone costing half the annual income of a family. Even the typical Chinese consumer can't afford an iPhone costing over 10% of their annual income, but this doesn't stop the country from generating $44 billion in FY19 sales. The number was down from $52 billion in FY18 sales.

Source: Apple FQ4'19 earnings release

JPMorgan analyst Samik Chatterjee sees a huge potential in Apple capturing half of the up to 35 million and growing

Looking for a portfolio of ideas like this one? Members of DIY Value Investing get exclusive access to our model portfolios plus so much more. Signup today to see the stocks bought by my Out Fox model during this market crash. 

This article was written by

Stone Fox Capital profile picture

Stone Fox Capital (aka Mark Holder) is a CPA with degrees in Accounting and Finance. He is also Series 65 licensed and has 30 years of investing experience, including 10 years as a portfolio manager.

Mark leads the investing group Out Fox The Street where he shares stock picks and deep research to help readers uncover potential multibaggers while managing portfolio risk via diversification. Features include various model portfolios, stock picks with identifiable catalysts, daily updates, real-time alerts, and access to community chat and direct chat with Mark for questions. Learn more.

Analyst’s Disclosure: I am/we are long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (58)

GILD agrees with AAPL as it will make key virus drug Remdesivir in India. A huge growing market.
Wiseyou profile picture
@stone Capital,

I have always appreciated your articles and agreed with them. However, this time I think that you are overly pessimistic about China and overly optimistic about India. It has only been 6 months after the beginning of the Covid-19 pandemic and China was the first to lift mitigation restrictions on their commerce. They are recovering.

Aren't you being unduly pessimistic assuming that China should have recovered to their pre-pandemic levels and unduly optimistic assuming the India will just shrug off their Covid-19 shroud? Mumbai (India's New York) is still locked down. Ahmedabad (India's Austin) still is not allowing anybody to go to work.

I have many friends in India and I can tell you that India is not yet at its peak. They are still in their upward exponential phase, not different from China, Europe, and U.S. in March and April, and about where Brazil and some Middle Eastern Countries are, reaching for the sky. There is tendency to underestimate the impact of Covid-19 both before and after the peak.

We are also not seen the true aftermath of Covid-19. 20 states in the US have now shown new peaks of Covid-19 infections resulting from the widespread protests. The virus is probably dancing with joy, from person to person. Who could have seen the last 6 months of economic shut down in the U.S.

So, I think that your claim that India will be the new China for Apple needs to wait another 6 months. China may do much better than you think in terms of purchases of Apple products. Incidentally, I am uncomfortable calling iPhones a consumer purchase, suggesting that it is a optional choice. In this day and age of Covid-19, an iPhone has become an essential purchase.

It has become the primary source of communication, news, information, and bill payments about the world in which we live. The US is falling apart grappling with racism and police brutality as it is coming out of its lockdown. Europe is licking its wounds with hundreds of thousands of deaths. China is doing its best with a shattered economy. An iPhone and good computer are essential in such an environment.

Yes, some people in China will buy Huawei, if they have no intentions to travel abroad. Nobody will buy Samsung, Google, LG, or any of the foreign cell phones over Apple. So, which cell phones will they buy? Apple iPhones of course. It is not only made in China but it is the best made in the world, or at least Chinese think so. There will be no hesitation of Chinese to buy Apple.

I have long believed that India will be a significant part of the Apple market because almost every person who rides on airplanes in India (unfortunately all stopped for now) use an iPhone. India is not a smartphone country yet like China. You cannot shop, eat, or go on public transportation in China without a smartphone. They use iPhones for everything in China including love and sex.

Smartphones are no longer a consumer item or a commodity. It is an essential part of their lives, possibly more essential than even their electricity, their bathrooms, kitchens, and mail. You cannot pay bills, get your news, communicate with your family and friends without a smart phone. There is no question, if you have the money, you buy an iPhone. If you don't have the money, you save and save until you can afford one.

The same is not true in India yet. People don't use their cell phones to pay bills and shop. They just talk and text with them. You can survive in both town and country with cash and a 20 year Samsung. Until the iPhone becomes an essential part of their lives, probably only the rich will use the iPhone. A vast majority of professionals and students don't have computers. This will happen as India grows.

No, India is not China yet.
Stone Fox Capital profile picture
This article has nothing to due with covid19, it has everything to due with the global economy shifting business out of China. India won't be China for a decade, but India is a growth opportunity and Apple probably won't grow much in China due to govt pressure for citizens to buy Chinese products.
Nick Cox profile picture
Yes the author certainly underrates the negative impact if COVID 19 on India and overrates any Chinese reaction to Apple because of Trump's blustering.Fortunately the Chinese government is a lot more temperate than the U.S. government.
Nick Cox - " Fortunately the Chinese government is a lot more temperate than the U.S. government."

Thanks (not) for again talking down our country and praising our adversary.
Stone Fox Capital - right before Corona hit you thought Apple was overpriced at $300, and now 3-4 months later, with many Apple stores still closed and many economies suffering worldwide, you now believe that $320 is a fair price?

I don't disagree that Apple should be $320 (and higher), just confused as to how you changed your mind so quickly. Apple has not released or announced anything new, or anything we didn't know they would release, since your pre-Covid 'Apple is overpriced' opinion.
Stone Fox Capital profile picture
The stock dropped to $220. Are you complaining that I was right?
Stone Fox Capital - Actually, no you were not.

The stock dropped to $220 after Coronovirus crisis started, as did much of the market.

Shortly before Coronovirus happened, you thought Apple was overvalued at $300, something I debated with you via SA.

However, now that we had the crisis which is actually not completely over, high unemployment worldwide, with Apple stores closed and Iphone sales projections lowered, possible talk of another trade war with China, you now seem to be saying that $320 is a fair price for Apple.

Based on what did you change your opinion? Apple didn't announce anything unexpected since your somewhat bearish prior/recent assessment of Apple.
Apple recognizes the size and potential of the Indian market. Keep it simple. That people is good!
Praveen_Chawla profile picture
Agree. It not about just tech - its a status symbol a fashion statement. When you pull out a late-model iPhone in India you communicate to your environment that you are somebody. The Chinese and Korean brands don't have cachet.
Stone Fox Capital profile picture
@Praveen Chawla
Yes, most people just don't understand the status symbol. Samsung has had comparable, if not better, phones for a long time, but most Americans don't want to be caught dead w/o an iPhone. Sounds like India is the same way for those with means to purchase one.
anil92691 profile picture
American companies are very excited about India but forget that India today trusts USA only for its growth just like the US only needs India for its growth. The potential for Apple in India is therefore dependent on two things:
1) India's need for more manufacturing and employment
2) India and US relations

India does not need Apple phones and security does not matter for Indians. For those that need it, they will be using cheap non-smart phones for texting and calls. And home grown computers for emails.

Stop reading forward if you think to ant-nationalist for a US citizen. But it is important to understand politics to understand future potential in India.

US businesses must remember that the current generation of India and future generations of India are not the same as previous generations. They are more nationalist, they are not blindly loyal to Gandhi that screwed India but got away with total loyalty and they are reading revisionist history. So when the time comes to tell USA, UK and the west for their pre-Independence screwing of India and post-independence help to Pakistan and China's invasion of Tibet and claims of Indian territory that it claims its own as a result of its invasion of China.

That said there is a risk but there is a huge potential as long as the US govt. does not start behaving like they own India. India will grow because its middle class is growing and US needs the market just like China. China will win if India takes a neutral position. US has an advantage in that China's commies think they are too powerful and think they will run all over India. They could beat India bad in a war but such a war would put India and China back 30 years. That 30 years place India ahead of China at the end. China may be too weak to control HK Taiwan and Tibet. India will bounce back faster with a 30% less population. Its cities decimated where it can be bulldozed and rebuilt. The cities are a mess anyway. Its nationalist movement will have one out with anti-Indian Muslims suffering poverty and Pakistan nuked and near empty.

The world is going to go back to the days between the times of WW1 and WW2. There may be many flareups. Russia will keep out and fan the wars with sale of equipment and moral support at the UN but will probably not directly step in unless directly attacked like in WW2.

The politics is the reason for the growth of US prospects in India and politics will decide how successful this will be and for how long.
Stone Fox Capital profile picture
Could've stopped after the first sentence... that's all the relationship needs. India has the opportunity to latch onto the technology sector via partnerships to leapfrog China, but if they become nationalists they will lose out remain a 3rd world economy.
anil92691 profile picture
See that is where the problem is "LEAPFROG". India does not want to play the LEAPFROG Game. That game involves interests of other nations to continue nations fighting. It needs to grow to a point where all its people have basic needs covered.

If the world and US really wanted to help, why has Tibet been ignored. The problem there is larger than Palestine and involves less effort to solve. China simply needs to leave with all its people and respect Tibet's boundaries. BUT NO. No gain in that. So why India?
1) For its markets
2) Neutralize China. See what good it did to Iran and Iraq.

The risk: India did have a good relationship until it joined the Non-Aligned Movement and that upset the USA as it always wants nations to do what it is told.

3rd world is a concept. India just happens to have more slums than USA. Except that the Indian slums have people with rights and mentally sane. Also India's largest slum is a thriving economy larger than many nations with landmass that is 10 times larger.

I watched India grow slowly. But grow each year with all its problems and even with Nixon and Kissinger telling Muslim Nations to go KILL INDIA. India kept its cool and focus on growth and never took that Nixon idiot personal. The growth in the last 10 years has been rapid and chaotic. And it is growing. And will continue to grow with the power of democracy and a mindset of peace.
any country embracing nationalism is destined for loss and failure
Just a comment regarding Apple’s slow entry into India. In the four trips I took to India, my greatest frustration was the lack of support I got for Apple products in India. During my first trip my laptop was drown and I lost contact with the valuable contacts I’d established. India is a dynamic and building country and Apple needs to catch up and be an integral presence.
Stone Fox Capital profile picture
$AAPL had to rely on 3rd party partners until recent rule changes. Unfortunately, they need far more than 1 store in the massive country, but its a start.
ChuckXX profile picture
In my opinion AAPL is woefully lacking in many cities. I live in a city of 904,000 people and here AAPL has one store. Obviously, its always packed and you have to make a reservation. Not a fun experience for sure.
Stone Fox Capital profile picture
The experience is just fine with the reservation. Would you prefer to show up and wait?
Nick Cox profile picture
I agree with the writer that India could be a good future market for Apple,and wrote about this recently:
However I think he under-estimates the macro socio-economic problems India currently faces, and the micro problems Apple faces in their negotiations over retail and manufacturing in the country.These have dragged on interminably.
ChuckXX profile picture
If AAPL really wants to ignite fantastic growth in India and other very poor countries they need to come up with a $99 Smartphone for the MASSES. It doesn’t have to have every bell and whistle just the important stuff that people need in their everyday life. Build it and they will come.
LazyGringo profile picture
Apple does not need the $99 crowd, Android can have them, they do not spend a dime online and only use free services like whatsap. with the iPhone SE at $400+ they will dominate the new generation of up and coming middleclass people in gthe developing world. This will clobber Samsung, Huawwei and others who have been dominating the middle of the market for years. No more. Almost everyone on earth is willing to pay an extra $100 for an iPhone over a Android phone. SO Huawei clone phones at $300 will no longer be appealing, pus tghe iPhone camera is much better.
I’ll take one iPhone 11 Pro, one masala dosa and one Ayurvedic massage.
Mr Cook said that he wants Apple to be the BEST, not the most units sold. If he wanted to sell the most, we would have created cheaper phones with less margin and flooded the market with them.
Stone Fox Capital profile picture
But that doesn't prevent Apple from selling a lot of units in India. Not to mention, the importance of Services is going to increasingly provide an incentive to lower phone prices for the recurring revenue stream.
Sunil Shah profile picture
@stone Fox Capital
i respect your research highly
But as an indigenous Indian,

Indians are extremely price conscious.
The top 1%‘tile are millionaires in $
And have already purchased the latest iphone on one of their 4 annual trips to the West.

But the remainder will

See these 2 articles, here on SA, for more detail on the India polarised income distribution and Indian Psyche

'Buffett Should Sell Apple: First Trillion Bagged While Risks Mount'


"Ebix: A Premier Indian Digital Wallet In The Making"

You're welcome
Sunil Shah profile picture
@Stone Fox Capital
Sorry your comment was attached to a double post of mine but you referred to the growing middle class.

Please check out the $ per capita income of the 40-50% Indian 'middle class'. Link above.
Remember not in PPP $, but nominal $ as apple price and components are $based.

OK I had my say, Namaste.
Well certainly sounds good sunil but im sure Apple has the best minds figuring out the India market. Nice try though.
Stone Fox Capital profile picture
@Sunil Shah
My point and my article all take that into account. The point was the market for 35M Samsung phones that $AAPL can split. An Indian doesn't have to be a millionaire to buy an iPhone. Nobody has made any wild assumptions that Apple can access a large portion of this market as you seem to suggest was stated.

As @stevefran mentions, Apple minds have it figured out. Don't think anybody thought 10 years ago that Apple would end up with a $50B+ sales opportunity in China.
sell apple buy india lol
Stone Fox Capital profile picture
Definitely a possible trade with the rest of the world wanting to shift out of a reliance on China. How are buying India?
Avinash Rulz profile picture
play india MSCI ETF
Stone Fox Capital profile picture
@Avinash Rulz
The $INDA ETF hasn't gone anywhere since the start in 2012. Not a big fan of country ETFs, but maybe India is due for a breakout.
Just a phone strategy for India is tough to sustain. Apple needs an all-in strategy for India.

Phone + Studio for content development + Apple TV + Local manufacturing

There is enough market for Indian sub-continent to justify big investment in studio and version of affordable phone
Stone Fox Capital profile picture
Yes, pretty much understood once building up the market. Local manufacturing is already part of the equation.
A whole lot of industrious people in India. Growing market by leaps and bounds.
If you focus on sales to
The top 15% income earners in India that would be a market of around 200 million people! Grow that market share from there as you learn their demand. You would be doing well with Apple!
Gary Jakacky profile picture
The US should actively promote an economic, military, and political coalition of Japan, Korea, Taiwan, India, and Russia (we have relations with these countries but I mean greater emphasis).

BOOM! China is confined.
Stone Fox Capital profile picture
@Gary Jakacky
Well, hopefully the shift to India starts making some swift progress in the next few years. India would be wise to make it easy for American companies to work in their country.
Fisherman53 profile picture
Throw in Australia, New Zealand, and maybe Viet Nam.
Gary Jakacky profile picture
Damn I forgot about the Aussies......yes; and we could call the coalition the coalition of the successful. It should replace the security council. the G8,g9 or whatever it is these days. And CHINA could be a member....as soon as they become a country that, like the others, balances world interests with their own unique situation. Just let them gnaw on the carrot for a couple decades while communism collapses under the weight of its own stupidity.
Yes. Of late young people in India are buying iphone in big numbers. Installment plans that are available on all major platforms are driving this growth. Good news for apple.
Stone Fox Capital profile picture
Got some actual numbers?
i would rather buy xiacy for india
Stone Fox Capital - "Got some actual numbers?"

Apple has about 55% of the top premium market in India.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About AAPL

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on AAPL

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.