Apple (AAPL) shares fell 12.8% in May. Due to the recent pullback, Apple shares have gained just under 12.0% since the beginning of 2019. Although the year-to-date returns are still impressive, Apple shares are trading 25.0% below its 52-week high of $233.47.
Apple stock has fallen 9.0% in the last 12 months. The stock has been flat since the beginning of 2018. Among the FAANG stocks, Apple might be impacted the most by the trade war due to its supply chain operations in China (FXI).
China is also a major market for Apple products. In fiscal 2018, Apple generated 19.5% of its sales from Greater China.
The trade war has weighed on iPhone demand over the last few quarters. The trade war will likely impact sales in the near term. If President Trump imposes a 25.0% tariff on Chinese imports, the costs for Apple products will continue to increase.
Apple will have to decide if it increases the prices and transfers the costs to consumers, which would impact sales. If Apple absorbs the tariff costs, it would impact the company’s bottom line. In recent quarters, the strong US dollar (UUP) helped Apple lower its prices in international markets.
Brokerages remain cautious
According to a CNBC report, Nomura Instinet lowered Apple’s 12-month target price from $180.0 to $175.0 and maintained its “neutral” rating. Nomura Instinet analyst Jeffrey Kvall said, “The renewal of China trade tensions are a likely near-term negative for Apple. A 25% tariff on device imports a pain any way they slice it.”
Earlier this year, Rosenblatt Securities expected iPhone shipments to fall year-over-year in the next two quarters. Rosenblatt Securities expected iPhone production to fall 5.0% and 10.0% in the next two quarters.