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.

Tariffs Won’t Hurt Apple (AAPL) Stock; Here’s Why

By Gene Munster

As we continue to investigate the developing trade dispute between the US and China, we have increased confidence that US-based companies, including Apple (AAPL), have virtually no risk related to the potential tariff increases.

Some more thoughts on this developing story:

  • There is a gross misunderstanding regarding the mechanics of these tariffs. The goal of levying tariffs on China is to penalize China-based companies selling competing products in the US. For example, a steel supplier in China is at high risk of increased tariffs because they are competing with US-based steel producers. Similarly, a phone manufacturer like Huawei is at high risk of increased tariffs, given its products compete with the iPhone.
  • The guiding principle for US policymakers is to protect US companies. Separately, it is unlikely that China would impose export tariffs on US goods manufactured in China as that would discourage US companies from manufacturing in China.
  • The bottom line is we do not believe companies like Apple will be impacted by this latest round of tariffs.

It is widely expected that the upcoming $325B in tariffs on goods imported from China will impact Apple products. We have a different view. We believe that little is known about the specifics and that ultimately Apple products will be spared from any tariff increases.

Some additional thoughts:

  • The reason we believe Apple will be spared is based on our belief that Trump sees Apple as a symbol of American strength and, separately, he has a favorable relationship with Tim Cook that he is interested in maintaining.
  • As a point of reference, Apple products were spared from a China tariff increase in September of 2018.
  • If we’re wrong and Apple products are included in the tariffs, we think Apple would bear the increased cost in the near-term (six months). The worst case scenario (all Apple products are impacted by 25% tariff) could then result in a 10% overall earnings decline for those six months. Simple math suggests a 25% haircut to US profits (which represent 43% of total revenue) could mean a roughly 10% decline in earnings. Beyond six months, we expect Apple would share the increased cost with the consumer. However, we stress that this illustrates the worst case scenario, and we believe Apple will be spared from the additional tariffs.
  • Further, it’s likely that finished goods (i.e. iPhones in the box) would not be included in the tariffs. If that were the case, there would be very little impact on Apple, as, with the exception of the Mac Pro (less than 1% of rev), all of Apple’s products are assembled overseas.


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