Apple shares were down 3% in early deals Monday after HSBC cut the tech giant's price target over fears of its exposure to the trade war between the U.S. and China.
HSBC Global Co-Head of Consumer and Retail Research Erwan Rambourg decreased Apple's price target to $174 a share from $180, retaining a "reduce" rating amid renewed Chinese growth risks and tariffs. Apple's fall Monday was accentuated by a global sell-off in tech shares after Google suspended some business activity with Chinese telecoms giant Huawei over the weekend.
The analyst note suggested that recent tariff hikes on imports of Chinese goods into the U.S., and the subsequent retaliation from Beijing, could either force Apple to increase prices, driving down demand given consumer sentiment about recent iPhone launches being "too pricey," or take a hit on margins.
"Second, there is a risk that in the Chinese market, consumers accelerate the shift to smartphone substitutes notably by going to local brands with comparable functionality (Huawei, Xiaomi)," Rambourg added.
The note also asserted that new services, and effective communication from Apple's management to divert investor attention toward them, cannot compensate for the shrinking demand for Apple's core iPhone product, another component in the trimming of price estimates.
Apple shares have retraced 10% since May 1, 2019, the day after the company released results, and have cited services as demonstrating strong growth consistently.
However, Rambourg suggested that "cheering a quarter in which iPhone sales were down 17% at a time when the stock was trading at a three-year high in terms of forward PE (price-to-earnings) valuation we think is very counterintuitive."
A spokesperson for Apple did not immediately respond when contacted by CNBC for comment.