Why Now is a “Critical” Time for Apple, Says Analyst

Apple stock

While Apple (NASDAQ: AAPL) has been doing well over the past few years, recent trade tensions between the U.S. and China could have a significant impact on the iPhone manufacturers and tech giant.

With a new round of retaliatory tariffs having entered effect as well as more potentially coming in the future, prices for iPhones and other Apple products could end up becoming more expensive, hurting sales.

One analyst has gone so far as to say that this is a “nervous environment” for the company as well as being a “critical” time for the future of the company. With much of Apple’s manufacturing coming from China, these tariffs could easily be passed on to the price retail consumers pay when they buy a new Apple product.

However, there’s also a silver lining for the company, as this begs the question of what would happen to Apple’s stock should a trade resolution come about.

Daniel Ives, an analyst at Wedbush, wrote in a note last week precisely on this topic, saying that the upcoming G-20 summit has some potential in this regard. Should a resolution come about, he argues, it wouldn’t be surprising to see the stock jump $20-$25 per share, representing a big buying opportunity.

“We believe the June quarter has been tracking ‘in line with expectations’ around China iPhone demand, which has seen a modest rebound from softness seen in the December/March quarters. That said, it’s a ‘nervous environment’ across the supply chain, with the semi space seeing clear uncertainty,” Ives wrote. “With China representing roughly 20% of all iPhone upgrades over the next 12 to 18 months, with our estimation that 60 million to 70 million iPhones in China are currently in the window of opportunity, this is a critical time for Apple to solidify its key installed base in the region.”

Currently, Ives has an “outperform” rating on Apple’s stock with a target price of $235 per share, around $40 higher than when it closed on Friday.

The longer the U.S.-China trade tensions linger, the worse it will be for Apple, but even if the stock declines significantly due to a prolonged trade war, all it would take is a resolution for much of that hypothetical loss in share price to return in a short period.

Over the past few months, Apple’s stock has seen a significant comeback, rising from its 52-week low in January at $142.19 before breaking the $210 price range in May. Shares of the tech giant didn’t move much in response to Ives’ opinion, dropping around 0.73 percent on Friday’s trading session.

Apple Company Profile

Apple designs a wide variety of consumer electronic devices, including smartphones (iPhone), tablets (iPad), PCs (Mac), smartwatches (Watch), and TV boxes (Apple TV), among others. The iPhone makes up the majority of Apple’s total revenue. In addition, Apple offers its customers a variety of services such as Apple Music, iCloud, AppleCare and Apple Pay, among others.

Apple’s products run internally developed software and semiconductors, and the firm is well known for its integration of hardware, software and services. Apple’s products are distributed online as well as through company-owned stores and third-party retailers. The company generates about 40% of its revenue from the Americas, with the remainder earned internationally. – Warrior Trading News