Loup Ventures

About the Author Loup Ventures

At Loup Ventures, research is in our blood. The spirit of our team has always lived on the curiosity to discover new insights that yield investment opportunities. For years we did this on Wall Street, focused on public tech companies. Now we invest in private frontier tech companies, but public companies like Tesla, Nvidia, and others are also meaningful innovators in frontier tech. These public companies are shaping the emergence of AI, robotics, autonomous vehicles, and AR/VR just as much as early stage startups. As a result, we’ve always kept a watchful eye on public market participants to inform our private investment strategy. Gene Munster is a managing partner and co-founder at Loup Ventures. Prior to Loup Ventures, Gene was a managing director and senior research analyst at Piper Jaffray where he covered technology companies including Apple, Amazon, Google and Facebook. During his 21-year tenure, Gene received many acknowledgements including: Top Stock Picker from Forbes, Best on the Street from The Wall Street Journal, and was widely recognized for his work on Apple. Gene holds a bachelor’s degree in finance and entrepreneurship from University of St. Thomas.

Apple (AAPL) Stock: Why Investors Should Not Be Worried By Trump Manufacturing Pressure

By Gene Munster

  • In a Friday filing with the U.S. Trade Representative, Apple (AAPL) outlined how proposed U.S. tariffs on $200 billion of Chinese goods would impact Apple Watch, AirPods, Beats, and other smaller product lines.
  • While Apple does not break out the contribution from these products, we estimate they will account for 4% of revenue in FY18 and grow at 35% in FY19 reaching 5% of sales.
  • If passed, we believe these tariffs could lower the profitability of Apple Watch and AirPods by 10-20%, resulting in just under a 1% negative impact on Apple’s profits in FY19.
  • We believe, beyond 2 years, these tariffs will go away.
  • More importantly, the filing appears to have triggered a renewed challenge from President Trump for Apple to move more production from China to the U.S.
  • Apple may fractionally increase production in the U.S. over the next 5-10 years, but we expect the share of manufacturing in the U.S. to remain small (<10%). We estimate that about 5% of Apple’s manufacturing and assembly takes place in the U.S today.
  • Despite the pressure from Trump, Apple remains in good standing with the Trump administration and, earlier this year, committed to investing $350 billion in the U.S. over the next 5 years.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio.

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