Apple, Inc. (NASDAQ: AAPL) stock is down 6.2 percent in the past five trading sessions as investors become increasingly concerned the tech giant could get caught in the crosshairs of the escalating trade war between the U.S. and China.
Not only does Apple assemble its iPhones in China, it also sells a large number of devices in China as well. In that respect, Apple is vulnerable to both higher Chinese export tariffs and a potential decline in Chinese consumer confidence.
Several Wall Street analysts have weighed in on the potential impact of the trade war on Apple.
Morgan Stanley analyst Katy Huberty said a 25 percent tariff on iPhones could drive up the price of the iPhone XS by $160 unless Apple covers the costs itself.
“Apple has one of the most significant exposures to Chinese exports to the US in our IT Hardware coverage group, given final assembly for many of its consumer electronic devices is located in China,” Huberty wrote. Morgan Stanley has an Overweight rating and $234 target on Apple's stock.
Wedbush analyst Daniel Ives said Apple has become the “poster child’ of the trade war, and iPhone production costs may rise by up to 3 percent thanks to the latest round of tariffs.
“Apple and Cook are seeing pressure on both ends of the spectrum from a supply and demand perspective given the company's flagship Foxconn factory represents the hearts and lungs of the Cupertino iPhone franchise while China represents a growth linchpin region for the company thus representing 20% of all iPhone upgrades over the next 12 to 18 months,” Ives wrote. Wedbush has an Outperform rating and $235 target on the stock.
On Wednesday's PreMarket Prep trading show, Loup Ventures' Gene Munster said the U.S. Trade Department is unlikely to implement any tariffs that would hurt a large American company like Apple, and China will also be reluctant to target Apple with tariffs directly.
“They have a million people that work for Foxconn that assemble Apple products, so it’s unlikely that they are going to bite the hand that feeds them,” Munster said. Instead, Munster said the biggest trade war threat for Apple is a potential boycott on Apple devices by Chinese consumers.
Tigress Financial analyst Ivan Feinseth said that despite the trade war concerns, Apple still has upside to at least $220 within the next year.
“The recent pullback in Apple over renewed China trade tensions overestimates any negative impact of fully assessed tariff levels,” Feinseth wrote in his daily newsletter.
Apple's stock traded around 4190.95 per share at time of publication.
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