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Slowing iPhone demand, trade war headwinds and possible ripple effects from a Huawei battle don't bode well for Apple, according to a UBS analyst.
The Swiss bank cut its 12-month price target on the iPhone maker to $225 — down from a previous $235. Apple closed at $186 Thursday.
UBS still has a "buy" rating on the stock but cited evidence from a survey of 8,000 people across six countries that suggests consumers are in no rush to upgrade their phones. For iPhones specifically, "purchase intention" looked to be stabilizing at a low level in all regions except China, UBS analyst Timothy Arcuri said in a note to clients Wednesday.
"We believe a slightly lower multiple is prudent given soft smartphone market and ongoing US/China trade issues," Arcuri said.
Apple shares have taken a beating in May as Washington and Beijing remain locked in a stalemate on trade. Shares are down 7% for the month, as of Tuesday's close. The U.S. raised tariffs to 25% on $200 billions worth of Chinese goods earlier in May, and China retaliated by upping levies on $60 billion worth of U.S. imports.
Most of Apple's supply chain is in mainland China, including the iPhone's final assembly by Foxconn. Apple's China business accounted for more than $10 billion — more than 17% of sales — in its fiscal second quarter.
Arcuri also said the "Huawei situation" could indirectly impact Apple. On Thursday, the Wall Street Journal reported that a microchip company backed by Microsoft and Dell accused Chinese tech giant Huawei and one of its executives of stealing trade secrets. Last week, the U.S. Department of Commerce added the company to Entity List — meaning American companies would need a license to work with Huawei.
"Apple is not directly impacted, but relaxation of some sort is possible," Arcuri said. "Negotiations between US/China are ongoing and an extension has been granted for some critical items, but we do think a nationalistic movement – similar to the one we saw at the time of the arrest of Huawei's CFO in November – seems quite probable and would impact iPhone sales."
UBS isn't the only one cautious on Apple. Earlier on Thursday, Goldman Sachs analyst Rod Hall said in a note to clients that Apple earnings could drop 29% if the company's products were banned in mainland China.
To be sure, Arcuri said Apple would likely rebound in the event those headwinds ease.
"After a year that is impacted by China demand slowdown and elongating replacement cycles, we think iPhones can grow as these headwinds abate," Arcuri said.
— CNBC's Fred Imbert contributed reporting.