Fed Governor Adriana Kugler to resign
Investing.com -- Wedbush analyst Daniel Ives lowered the price target for Apple (NASDAQ:AAPL) stock due to significant concerns over the impact of tariffs on the company’s cost structure and consumer demand.
“The tariff economic Armageddon unleashed by Trump is a complete disaster for Apple given its massive China production exposure,” Ives said in a Sunday note.
The analyst cut the target price to $250 from $325, stressing that “no U.S. tech company is more negatively impacted by these tariffs than Apple.”
The brokerage estimates that 90% of iPhones are produced and assembled in China. With current tariffs at 54% for China and 32% for Taiwan, the effect on Apple could be "devastating," affecting not only its cost structure but also consumer demand for its products.
Apple’s supply chain is deeply rooted in Asia, with Foxconn (SS:601138) producing a wide range of hardware devices including iPhones, iPads, Macs, and AirPods.
While Apple has taken steps to diversify its manufacturing to other countries such as Vietnam, India, and the United States, the majority of its production remains in China. Wedbush estimates over 50% of Mac products and 75%-80% of iPads are produced there.
The technology giant previously unveiled a $500 billion U.S. investment plan alongside U.S. president Donald Trump in February.
However, shifting even 10% of its supply chain from Asia to the U.S. would likely require around $30 billion and at least three years to execute, with significant disruption expected along the way, according to Wedbush’s estimates.
“For U.S. consumers the reality of a $1,000 iPhone being one of the best made consumer products on the planet would disappear,” Ives wrote.
“It speaks to our point that if consumers want a $3,500 iPhone we should make them in New Jersey or Texas or another state....the concept of making iPhones in the US is a non-starter in our view at $1,000,” he added.
The resulting price increases would be extreme, and the short-term hit to Apple’s gross margins during a tariff-driven shift could be “mind-boggling” for the U.S. tech behemoth, said Ives.
Given the current uncertainties surrounding tariffs, Wedbush does not expect Apple, along with most tech companies, to provide guidance during the first-quarter conference calls over the next month.
The firm emphasized the difficulty in modeling the price consequences of the tariffs, stating that the sheer uncertainty could lead to "demand destruction" for consumers globally.