This Analyst Optimistic for Apple (AAPL) Stock After US-China Trade Truce
Apple (AAPL) investors can breathe a (temporary) sigh of relief.
Last week, US president Donald Trump and China president Xi Jinping agreed to a 90-day trade war ceasefire, pushing off fears of a potential tariff on Apple products. Though the US maintains its 10% tariff on $200 billion worth of Chinese goods, the latest round of tariffs (which were slated to take effect in January) would have increased that tariff to 25% and could have included Apple’s most important product, the iPhone.
Even though this ceasefire is temporary, Wedbush analyst Daniel Ives sees this as good news for the tech giant and, as such, reiterates his Outperform rating with a price target of $275. (To watch Ives’ track record, click here)
Ives commented, “Given the company’s high exposure to China from both a demand and supply chain perspective with its flagship Foxconn factory front and center, a potential 10% tariff or draconian 25% tariff on iPhones and related components would have been a tough gut punch to absorb for Cupertino (and its investors). Based on its exposed COGS and China exposure a 10% tariff or higher as threatened by the Trump administration this past week could have potentially reduced Apple’s FY19 EPS between 3% and 7% based on our initial analysis if enacted. While its still an overhang given the next 90 day negotiation, in the near term a stepped up 25% tariff off the table on components (e.g., batteries) and/or a potential 10% tariff on iPhones shelved will be a positive data point digested by tech investors, in our opinion.”
Ultimately, Wall Street is just not sure yet about this chip giant, but the optimists still win out in the bigger picture. Out of 33 analysts polled in the last 3 months, 18 rate a Buy rating on AAPL, 14 issue Hold, while only 1 recommends Sell. The 12-month average price target notably stands at $228.31, marking a healthy return potential of 35% from where the stock last closed. (See AAPL’s price targets and analyst ratings on TipRanks)