A firm that downgraded Apple (AAPL) stock is keeping a sell recommendation on it, saying in a recent report that the stock still has a long fall ahead of it.
In the report, MoffettNathanson Research cites a combination of geopolitical shifts, increased production costs due to tariffs, and the rising probability of a recession as weighing on Apple stock.
The firm said the worst-case scenario for Apple was, at least temporarily, removed from the table when the Trump Administration paused reciprocal tariffs for smartphones on April 11th. “But Apple is nowhere near out of the woods,” the report notes. “As the Administration made clear, Apple imports from China will still bear 20% tariffs, a level that would have been unimaginable just a month ago.”
The analysts are trimming their estimate, and lowering Apple’s price target to $141 from $184. They also are keeping their “sell” rating in place.
The report notes the thicket of issues that Apple has to navigate regarding tariffs — and that the company is caught in the middle because of China’s importance in the global electronics supply chain.
“Paying a fortune in tariffs or paying a fortune in rearchitecting supply chains only to finish with much higher costs is a lose-lose choice,” the analysts note. “Moving production to the U.S. for an ecosystem that employs as many as three million people in China at wage rates as low as $3 per hour is self-evidently a non-starter.”
While Apple has shifted some production to nearby India, the analysts say that isn’t a panacea. India has sufficient capacity to meet as much as half of U.S. demand for iPhones, the report says, but while the phones are generally being assembled in India, the parts are still from China. That raises the question of whether the phones would be subjected to Indian or Chinese tariff rates or some costly combination of both.
Even putting the tariffs aside, the researchers find plenty of reasons to worry about Apple, citing that they are behind other competitors in the AI space. And some seemingly tangential issues aren’t so tangential after all. For instance, the remedy phase of the Google (GOOGL) search monopoly case begins this month. The report notes that the royalties Apple collects from Google account for more than a quarter of Apple’s operating income, and the judge overseeing the case has already deemed those payments to be illegal, a premise the Trump administration is not challenging.
Plus, the report notes, there just isn’t much on the horizon to get excited about. A foldable iPhone would create buzz, but that was probably something that would be showcased at next year’s Worldwide Developer Conference at the earliest, even before tariffs. With the current tariff threats, they say, that now seems “unimaginable.”
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