Apple (AAPL) Stock Price & Analysis: Stock Drops 7.3% as Trump Tariffs Threaten Earnings

Apple (AAPL) Stock Price & Analysis: Stock Drops 7.3% as Trump Tariffs Threaten Earnings

TLDR

• Apple stock fell 7.3% on Friday, down 15.9% since tariff announcement
• Analysts estimate only 20-30% chance Apple receives tariff exemption
• Tariffs could reduce Apple’s earnings per share by 12-28%
• Apple faces multiple challenges with 64% of revenue from outside U.S.
• China remains crucial for Apple’s supply chain despite diversification efforts

Apple stock continued its downward slide on Friday, dropping 7.3% to close at $188.38. This marks the second consecutive day of losses following President Donald Trump’s announcement of new tariffs, with Apple shares now down 15.9% since Wednesday.

The steep decline comes as investors grapple with the potential impact of Trump’s sweeping tariffs on Apple’s business. Unlike during Trump’s first term, when companies had weeks to formally request exemptions, the current tariffs were implemented through the International Emergency Economic Powers Act.

Morgan Stanley analyst Erik Woodring puts the odds of Apple receiving a tariff exemption at just 20%.

“For Apple to receive an exemption, it would have to be a company or product specific exemption granted specifically by the president,” Woodring noted in a client note.

Supply Chain Vulnerabilities

Apple’s heavy reliance on Chinese manufacturing presents a major challenge. A large majority of its products are assembled in China, with “Greater China” accounting for 17% of the company’s revenue in fiscal 2024.

The company has been working to diversify its supply chain in recent years. Apple now makes roughly one-in-seven iPhones in India and has shifted some assembly to Vietnam.

However, these diversification efforts may not provide much relief under the new tariff structure. Products imported to the U.S. from India will face a 26% levy, while those from Vietnam will be hit with a 46% tariff.

“Apple has nowhere to hide—and neither do its shareholders,” notes Adam Levine of Barron’s.

Financial Impact Estimates

Analysts project substantial financial consequences for Apple. Without mitigation efforts, Woodring estimates the tariffs could cut Apple’s 2026 earnings per share by up to 26%.

Needham analyst Laura Martin presents an even bleaker outlook. She calculates that Apple’s earnings per share could fall by over $2 from the current consensus estimate of $7.32 in fiscal 2025, representing a 28% reduction.

This assumes Apple doesn’t get a tariff exemption and doesn’t raise prices in the U.S. market.

Global Revenue Exposure

Apple’s global footprint compounds its vulnerability. With 64% of Apple’s fiscal 2024 revenue coming from outside the U.S., the company faces potential retaliation from foreign markets.

Countries may impose their own tariffs or digital service taxes in response to Trump’s trade policies. Such measures would directly impact Apple’s services segment, which is the company’s second-largest unit, its fastest grower, and boasts a 74% gross margin.

A French government spokesperson has already suggested European Union digital service taxes on major U.S. tech companies, including Apple.

Beyond direct financial impacts, Apple could face non-quantifiable risks. A nationalist backlash across the world could lead to boycotts of leading U.S. brands, with Apple likely to be high on the list of targets.

Wall Street remains divided on Apple’s prospects. Despite the tariff concerns, Morgan Stanley’s Woodring maintains an “overweight” rating on Apple stock with a price target of $252, while Needham’s Martin has a “buy” rating and a $260 target.

China responded to Trump’s tariffs today by announcing its own 34% tariffs on U.S. products, potentially starting a cycle of retaliatory measures that could further pressure Apple and other U.S. companies.

The next few weeks will be critical as Apple evaluates its options. The company must decide whether to absorb the tariff costs, raise prices, or pursue some combination of both strategies.

Tim Cook’s leadership will be tested as he navigates these complex trade dynamics. During Apple’s latest quarterly investor call, Cook highlighted his optimism about markets like India, stating, “I think there’s lots of upside there.”

But with its stock down 15.9% in just three days, Apple investors appear skeptical about the company’s ability to weather this trade storm without lasting damage.

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