Apple(US:AAPL)2025-05-28 05:45Investment Rating - The report assigns an "Overweight" rating for Apple, Inc. (AAPL) with an industry view of "In-Line" [5]. Core Insights - A 25% tariff on iPhone imports is deemed insufficient to incentivize Apple to relocate production to the US due to high costs and long time-to-market considerations [3][8]. - The potential for tariff escalation poses additional concerns for Apple investors, with the possibility of a 50% tariff being discussed [3][8]. - Apple has committed to investing $500 billion in the US over the next four years, which could be leveraged to mitigate tariff threats [10]. Summary by Sections Tariff Implications - President Trump has threatened a 25% import tariff on smartphones, including the iPhone, which may not be legally enforceable [3][8]. - Building new assembly plants in the US would require a minimum of 2+ years and several billion dollars, making it a significant challenge for Apple [8][9]. - A US-produced iPhone would be approximately 35% more expensive than one produced in China or India, far exceeding the 4-6% price increase needed to offset a 25% tariff [8][9]. Financial Projections - The report estimates that a 25% tariff would add about $300 million in incremental tariff costs for Apple, translating to an 11 cent headwind to EPS for FY26 [10]. - Apple's projected EPS for the fiscal years ending in 2024, 2025, 2026, and 2027 are $6.75, $7.02, $7.69, and $8.64 respectively [5][11]. Production Strategy - Apple may consider reshoring some production of smaller volume products to appease the administration, which could help mitigate geopolitical risks [10]. - The report suggests that Apple could announce commitments to produce other products in the US, which would be less symbolic than the iPhone but still beneficial [10].