Wedbush’s Ives shakes off Trump’s Apple tariff talk

Analyst Daniel Ives, sitting on a street-high $310 price target, has struck a wait-and-see pose.

From a note to clients that landed on my desktop Tuesday evening:

We note the $200 billion of Chinese goods/imports from China could be subject to a 25% tariff starting in January, however importantly Apple products with iPhones front and center that are produced from the flagship Foxconn factory in China were exempt from this initial tariff and not caught in this downdraft.

The Street will not be taking this news lightly as with the litany of bad news Apple (and its investors) have seen over the last month from the Cook iPhone metrics pull, softer data points out of Asia around XS/XR initial demand, and now this tariff threat on iPhones out of left field from Trump and Beltway will surely add to this white knuckle period for Apple.

While we ultimately believe this is all part of a broader negotiation with China as talks heat up over the next week, now Cook and Apple find themselves squarely at the center of the tariff talks which were previously background noise as investors try to gauge what a potential 10% tariff on iPhones and other products would do to demand and unit growth over the next 6 to 12 months if ultimately imposed.

While we are taking a wait and see approach around if this talk is more bark than bite from the Trump administration, we could see a negative knee jerk reaction to this latest tariff news in Apple shares that will add to the agita currently around the name.

Maintains Overweight rating and $310 price target.

My take: I figure the iPhone as Trump’s trump card. That he is playing it now suggests to me that negotiations may be coming to a head.

Bonus video: More dogs shaking off water.

5 Comments

  1. Andrew Cannon said:

    What would the actual dollar value of the tariff be per phone? 10% of the value (bill of materials) of the imported phone? I’m assuming it won’t be more than $40 – $50.. that would surely eat into margins, but I don’t see AAPL raising prices – thus no impact on demand.. thoughts?

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    November 27, 2018
  2. Gary Morton said:

    Would the 10% apply to the Chinese content of the iPhone only? That is how those things tend to work.Wh[y penalize Japan, Korea, Taiwan, US, etc. Most of what China does is assembly and aluminum/steel fabrication. I believe the WTO guidelines are to apply duties and tariffs only to the content from the offending country. While significant, assembly and metal fab are not the largest part of the iPhone BOM cost.

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    November 27, 2018

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