Home Business Here's what top analysts think of Apple after the iPhone tariffs threat: 'Trump piles on' – CNBC

Here's what top analysts think of Apple after the iPhone tariffs threat: 'Trump piles on' – CNBC

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Apple remains under scrutiny from Wall Street as PresidentDonald Trump’s threat of new tariffs on iPhones piled on to the stock’s recent downward spiral.

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Apple shares fell 1.8 percent on Tuesday, bringing the stock’s loss since the start of November to more than 20 percent.

Trump’s threat of a 10 percent tariff on iPhones “could simply be a negotiating tactic ahead of the G20 Summit later this week,” UBS said in a note. The firm estimates that a tariff of that magnitude would represent a $1.5 billion hit to Apple’s earnings. If Trump ups the rate to 25 percent, as he’s threatened, UBS says “the impact would be ~$3.8B or ~$0.83 in EPS.”

Baird commented in a note: “When it rains it pours, Trump piles on.”

Bernstein’s Tony Sacconaghi explained Apple’s revenue stream on CNBC’S “Squawk Box,” saying that “25 percent of Apple’s revenue, call it $50 billion, would be subject to a 10 or 25 percent tariff.”

Trump’s insistence on escalating the trade war could provoke China to respond by targeting Apple with penalties, Sacconaghi noted.

“Could they try to disrupt Apple’s supply chain in some way? Could they not authorize new phones for sale in the country? There are many things that China could do and that could ultimately be even more devastating,” Sacconaghi said.

Here’s what major Wall Street analysts were saying about 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. The reality is Apple and Cook are firmly implanted in China as a core production factory and ultimately we would not see this dynamic changing in the foreseeable future.

It is unclear whether the incremental tariffs would be at 10% or 25%, but assuming a 10% rate, we estimate an EPS impact of ~$0.33 (~2.5%) on our baseline F2019E EPS of $13.06 assuming implementation in March Q and assuming AAPL would absorb the incremental costs rather than passing them on to consumers … We think Apple could ultimately mitigate any tariff impact but this would clearly take time as even the $10B Foxconn facility in Wisconsin is intended to make LCDs and any mitigation would increase Apple’s costs … It is difficult to analyze the impact of tariff on demand if Apple chooses to pass the increases to consumers. However, we analyze the impact on profits and earnings assuming Apple is unable to pass on the increases or mitigate the higher costs. In our analysis, we assume a tariff would be levied in January, impacting three quarters of F19. We assume 80% of the Americas revenue is from the US and 60% of that is from iPhone. Assuming 40% gross profit margin for iPhone and a 10% tariff equates to ~$1.5B in OP impact or ~$0.33 in EPS. If the tariff rate is 25%, the impact would be ~$3.8B or ~$0.83 in EPS (~6.4%).

While we take the negative supply chain comments with the proverbial grain of salt, there’s little question that higher iPhone prices due to potential tariffs would likely negatively impact demand and profitability at some level. We certainly acknowledge the near-term risk, but remain positive on the long-term position and would buy on weakness …Tariffs on imported iPhones and Macs could force AAPL to raise prices, which in turn would likely dampen overall demand. Reduced demand in the U.S. would also negatively impact the assembly of iPhones and other Apple products in China. It’s a lose-lose scenario.

Given multiple uncertainties, we are not yet changing any estimates.

Watch: Steve Jobs explains the iPhone to CNBC in 2007

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