The President’s iPhone does it again, taking the market down 2.6% and Apple down 4.6%.
Trump’s comments/tweets around China today specifically around “ordering US companies to immediately start looking for an alternative to China” is a clear shot across the bow at Apple and the semi space with stocks down heavily in light of this latest news.
For Apple, as we have discussed at length the company in a best case scenario would be able to move away 5%-7% of iPhone production out of China and it would take at least 3 years to move 20% of iPhone production outside of its core Foxconn/China footprint based on our analysis with 50% of iPhone production moving out of China taking more than 5 years in our opinion.
On the supply chain, we believe Apple is aggressively looking at alternative options within the supply chain in light of this US/China UFC trade battle around moving 5%-7% of iPhone production to India and/or Vietnam, away from China, which would in a best case scenario be ready to roll 18 months from now in our opinion…
We believe the China tariff situation is a $20-$25 stock overhang on shares of Apple as this remains the nightmare that will not go away for investors (as well as Cupertino now clearly caught in the crossfire).
Maintains Outperform rating and $245 price target.
My take: If history is any guide, we’ll get a counter-tweet before too long. If only we knew when…
UPDATE: At 5 pm Friday, Trump doubled down, tweeting this…
China should not have put new Tariffs on 75 BILLION DOLLARS of United States product (politically motivated!). Starting on October 1st, the 250 BILLION DOLLARS of goods and products from China, currently being taxed at 25%, will be taxed at 30%… Additionally, the remaining 300 BILLION DOLLARS of goods and products from China, that was being taxed from September 1st at 10%, will now be taxed at 15%. Thank you for your attention to this matter!
Apple lost another $1.09 (0.54%) in after-hours trading.