Apple Inc (NASDAQ:AAPL, ETR:APC) shares traded more than 5% lower after analysis at Wedbush slashed their price target on the iPhone maker to $250 from $325 citing supply chain uncertainty due to US president Donald Trump’s tariffs.
Wedbush believes the tariffs are a complete disaster for Apple given its massive China production exposure. The new tariff slate, 54% on China and 32% on Taiwan, poses a significant risk to Apple’s cost structure and could ultimately lead to higher consumer prices and weakened demand, the analysts wrote.
“In our view, no US tech company is more negatively impacted by these tariffs than Apple with 90% of iPhones produced and assembled in China,” they wrote. They also estimate more than 50% of Mac products and 75% to 80% of iPads are produced out of China.
“Unlike during COVID, when normalization was visible on the horizon, this tariff environment is a very different and far more troubling scenario,” they wrote.
Apple has made progress in diversifying its supply chain to Vietnam, India, and the US, but Wedbush notes that the “hearts and lungs” of its manufacturing still lie in Asia.
US-made iPhone a 'non-starter'
Even with Apple’s recent announcement of a $500 billion investment in the US alongside Trump, the analysts believe relocating production at scale is unrealistic in the near term.
Moving just 10% of the supply chain to the US would take three years and cost an estimated $30 billion. The result, according to the analysts, would be iPhones priced at $3,500, a scenario they call "a non-starter."
“Price points would move up so dramatically it's hard to comprehend and the near-term margin impact on Apple's gross margins during this tariff war could be mind-boggling for this US tech stalwart,” they wrote.
Due to the extreme uncertainty, Wedbush does not expect Apple or other tech giants to provide guidance in upcoming quarterly calls.
Despite the price target revision and near-term uncertainty, the broker remains positive about Apple’s long-term growth potential, maintaining their ‘Outperform’ rating.
“We stay bullish for the long-term view on Apple as the Services business and strong free cash flow support a base case valuation of $250,” they wrote. “Our bear case is $160 and bull case (tariffs removed or exempt) is back to $325.”