TLDR
- Jim Cramer remains optimistic about Apple stock despite recent underperformance, saying Tim Cook and his team deserve the “benefit of the doubt”
- Jefferies analyst Edison Lee upgraded Apple from Underperform to Hold, citing potential for June quarter earnings to beat expectations
- iPhone sales in China grew around 10% in early June quarter driven by targeted discounts, supporting 8% revenue growth forecast
- Apple faces potential tariff risks with analyst calculating 7% hit to earnings under various tariff scenarios on China, India, and Vietnam
- Cramer suggests $180 as a key buying level (25 times earnings) while seeing potential for 35 times earnings if negativity clears
Apple stock received some rare good news this week, though the path forward remains cloudy for the tech giant.
Jefferies analyst Edison Lee upgraded Apple from Underperform to Hold on Tuesday. The move came as a surprise given the recent skepticism surrounding the company’s AI strategy.
Lee’s upgrade centers on expectations for Apple’s upcoming June quarter earnings. He believes the company could beat its own guidance for low-single-digit revenue growth.
The analyst forecasts 8% revenue growth for the quarter. This optimism stems largely from stronger-than-expected iPhone performance in China.
According to Lee’s estimates, iPhone sales in China grew around 10% in the first two months of the June quarter. Targeted discounts helped drive this improvement in Apple’s crucial market.
However, Lee warns this strength may not last. He expects iPhone shipments to decline 6% year-over-year in the September quarter.
The analyst points to a lack of compelling new features as a key concern. He also notes that AI capabilities haven’t yet become a game changer for Apple.
Cramer Maintains Faith Despite Challenges
CNBC’s Jim Cramer offered his own take on Apple’s prospects. Despite the stock’s recent underperformance, Cramer remains bullish on the company’s long-term potential.
“Tim Cook and his team have earned the benefit of the doubt,” Cramer said. He pointed to Apple’s history of bouncing back from difficult periods.
Cramer believes Apple stock deserves to trade at a premium to the broader market. The stock currently trades at 28 times earnings compared to 23 times for the S&P 500.
The TV host identified $180 as a key level for potential buyers. This represents about 25 times earnings, a level where Apple has historically found support.
At that price point, Cramer would be ready to “back up the truck” with purchases. Conversely, he sees potential for 35 times earnings if the company can shake off current negativity.
Tariff Threats Loom Large
Lee’s analysis also highlighted potential risks from trade policy changes. The analyst calculated Apple could face a 7% hit to earnings per share under certain tariff scenarios.
These projections assume a 10% tariff on India, 20% on Vietnam, and 30% on China. All three countries serve as major manufacturing bases for Apple’s products.
Current tariff levels show India facing a potential 26% rate on U.S. imports. Chinese goods currently face temporarily reduced 30% levies.
However, these rates remain subject to change as trade negotiations continue. Lee believes the market may be too optimistic about potential tariff impacts.
The analyst’s new price target of $188.32 represents an increase from his previous $170.62 target. Even with the upgrade, this target implies downside from current levels.
Apple shares traded up 0.8% at $209.42 in premarket action following the upgrade. The stock has lagged broader market gains in recent months as investors question the company’s AI positioning.
Lee expects potential weakness in the September quarter could offset any June quarter strength, with iPhone shipments declining 6% year-over-year in that period.
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