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On Thursday, Jefferies analyst Edison Lee maintained an Underperform rating on Apple Inc. (NASDAQ:AAPL) with a price target of $202.33. Lee’s assessment centers on the potential impact of China tariffs on Apple’s financials, specifically regarding iPhone imports into the United States. According to Lee, if Apple were to absorb the entire cost of a 54% tariff on 37 million iPhones, the company’s net profit for fiscal year 2025 could decrease by 14%. This estimate is considered a simplified projection aimed at providing investors with a general understanding of the possible outcomes. Currently trading at $223.89 with a market capitalization of $3.36 trillion, InvestingPro analysis suggests Apple is trading above its Fair Value, with notably high valuation multiples including a P/E ratio of 35.4x.
Lee suggests that while Apple might be able to increase prices to pass some of the tariff burden onto consumers without greatly affecting sales volume, this could be counterbalanced by negative impacts on earnings from other non-iPhone products. Despite the possibility of Apple being exempt from tariffs, Lee believes the company would still need to expedite diversifying its supply chain. This would involve compensating suppliers more generously and allocating a larger share to those who can assist in this diversification. With current annual revenue of $395.76 billion and a gross profit margin of 46.5%, any supply chain adjustments could significantly impact profitability. InvestingPro data reveals 13 additional key insights about Apple’s financial health and market position, available to subscribers.
The analysis highlights selected players within Apple’s supply chain that could benefit from these changes. LY iTech, with its capacity in India, and Luxshare, with operations in Vietnam, are mentioned as companies that might gain from Apple’s need to adapt its supply chain strategy. Lee’s commentary indicates a preference for these supply chain entities over Apple’s stock itself.
The maintained Underperform rating and price target come amidst discussions on trade and tariffs, which have been a point of concern for companies with significant manufacturing operations in China. Apple, as a major importer of goods into the U.S., remains at the center of these discussions, with its stock performance potentially influenced by tariff-related developments.
In other recent news, Apple Inc. has been in the spotlight with several significant developments. Tigress Financial Partners has maintained a Strong Buy rating on Apple and raised its price target to $300, citing growth in services and innovation. The firm highlighted Apple’s record 2.2 billion active devices and over 1 billion paid subscriptions, alongside advancements in Apple Silicon and other proprietary technologies. Meanwhile, Visa (NYSE:V) has made a $100 million bid to replace Mastercard (NYSE:MA) as the network for the Apple credit card, amid Goldman Sachs’ plans to exit the consumer lending sector. This move is part of a larger competition involving major payment networks like American Express (NYSE:AXP).
Additionally, Apple faces criticism from financial journalist Herb Greenberg, who pointed out issues with product quality and strategy, including iOS bugs and connectivity problems with AirPods. Greenberg also raised concerns over Apple’s financial strategies, particularly its focus on stock buybacks and dividends. On the sales front, UBS analysts reported a 1% year-over-year decline in global iPhone sell-through in February, with notable decreases in China and Europe. Despite these challenges, Apple saw growth in India, where iPhone sales increased by about 20% year-over-year.
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