TLDR:
- Apple stock surged over 5% in premarket trading following a 90-day suspension of US-China tariffs
- The company confirmed tariffs would have shaved $900 million off its bottom line
- Morgan Stanley analyst suggests Apple may raise iPhone 17 prices in response to tariff pressures
- Apple’s fiscal Q2 revenue rose 5% year over year to $95.4 billion, with iPhone revenue up 2%
- Morningstar maintains a $200 fair value estimate for Apple, seeing the stock as fairly valued
Apple’s stock is making a comeback after weeks of pressure, jumping over 5% in early premarket trading on Monday. This surge follows confirmation from Washington and Beijing of a 90-day suspension of reciprocal tariffs after weekend trade talks in Switzerland.
The news comes as a relief for Apple investors. The stock had been hit hard when President Donald Trump announced his “Liberation Day” tariffs in early April, dropping over 7% in a single session and eventually reaching a low of $169.31.
🚨 Breaking:
🇺🇸 U.S. to cut tariffs on Chinese goods from 145% to 30% for 90 days.
🇨🇳 China to cut tariffs on U.S. goods from 125% to 10% over the same period. #Trade #USChina #Tariffs pic.twitter.com/hEwp9OJoWV
— Trader Edge (@Pro_Trader_Edge) May 12, 2025
The extreme negative reaction was driven by concerns about the tariffs’ impact on Apple’s financials. During its second-quarter earnings call, Apple confirmed the China tariffs would cut $900 million from its bottom line.
For the June quarter, Apple guided low-to-mid-single-digit year-over-year revenue growth. The company was rumored to have shifted much of its US-bound iPhone production from China to India as a workaround for the tariffs.
Tariff Impact and Company Response
Morgan Stanley analyst Erik Woodring reported that Apple had pulled forward components and finished goods to above-seasonal levels ahead of the April tariffs. This move was intended to mitigate some of the immediate tariff impacts.
In its 10-Q filing, Apple explicitly stated for the first time that tariffs could force actions including “increasing the prices of its products and services.” This opens the door for potential price increases with the iPhone 17 launch in the September quarter.
However, Woodring noted, “We still assume Apple is more likely to eliminate lower-end storage SKUs over raising like-for-like pricing with its next iPhone launch.” The recently confirmed trade deal should remove a major overhang that has stifled Apple stock for much of the year.
On Stocktwits, retail sentiment toward Apple stock had turned “extremely bullish” by early Monday. One watcher said the recent weakness was due to an overdue correction from pre-earnings levels and predicted the stock would return toward its all-time high of over $260.
Despite the recent surge, Apple stock remains down over 20% year-to-date. The market reaction suggests investors are optimistic about the tariff suspension’s impact on Apple’s future performance.
Financial Performance and Outlook
Apple’s March-quarter results were generally positive. Revenue rose 5% year over year to $95.4 billion, with iPhone revenue rising 2% to $46.8 billion. Gross margin improved by 50 basis points to 47.1%.
However, margin guidance was weak for the June quarter, reflecting the estimated $900 million impact from US tariffs. This highlights the material risk Apple faces from tariffs, affecting both profitability and longer-term demand.
Apple’s core devices are currently exempt from US tariffs, and the June quarter impact is primarily from accessories. Most US iPhone units are imported from India, which faces a lower current tariff rate than China (10% vs. 145%).
Management noted no signs of customers accelerating purchases in advance of potentially higher costs from tariffs. Apple is also building up its inventory as a precautionary measure to bring in lower-cost products.
Morningstar maintains a $200 fair value estimate for Apple. They lowered short-term profit forecasts to reflect direct tariff costs but maintain their base-case expectation for Apple to earn a long-term exemption from US tariffs.
They estimate a 25% downside risk to earnings and Apple’s valuation if it were to lose its exemption and face the full brunt of tariffs. However, they expect Apple would raise US prices and accelerate moving production to countries like India rather than absorb the entire impact.
Morningstar projects 7% compound annual revenue growth for Apple through fiscal 2029. The iPhone will remain the greatest contributor to revenue, with projected 6% growth over the next five years driven primarily by unit sales and modest pricing increases.
After the recent trade developments, the stock appears to be heading back toward the $200 level, which aligns with Morningstar’s fair value estimate. The 90-day tariff suspension gives Apple breathing room as it navigates ongoing trade tensions.
The latest tariff suspension news marks a potential turning point for Apple stock, which has struggled in 2025 despite strong fundamentals. Investors will now watch closely to see if this relief rally can be sustained.
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