Apple Stock To $250?

Apple Stock (NASDAQ:AAPL) saw considerable volatility over the last 5 trading days, falling by 23%, following President Donald Trump’s announcement of sweeping tariffs that apply to over 100 countries, although it surged 15% on Thursday, after the tariffs were paused for 90 days. Now, Apple stock still trades at about 20% off the highs of roughly $250 seen earlier this year.

 We estimate that Apple could see its earnings take a 30% hit in a worst-case scenario. However, Apple has always been clever with its pricing strategy, working with partners and efficiently managing its supply, and this could mitigate the impact of the tari roughly ffs, taking its stock back up to levels of $250 per share seen earlier this year.

Mitigating Tariff Impact 

The impact of the tariffs appear sizable for Apple, but we see several ways to lessen the impact.

• Apple hasn’t increased the base price of its flagship iPhones for over seven years. Over the same roughly seven-year period, the U.S. consumer price index has gained about 29%. This gives Apple room to raise iPhone prices by $100 to $200 for the next-generation iPhone due this fall without significant customer resistance.
• Wireless carriers in the U.S. have been aggressively subsidizing iPhones to attract and retain customers in a saturating mobile market. Given this trend, Apple could share some of the tariff burden with carriers, who might absorb part of the price increase to maintain competitiveness.
• Currently, most iPhones sold in the U.S. are manufactured in China, which faces cumulative tariffs of over 100%. The current tariff pause doesn’t apply to China. However, Apple can shift production to other countries like India, which faces a much lower 26% tariff (or 10% following the pause). It also helps that Apple CEO Tim Cook is known to be a wiz at supply chain management.
• Apple’s services business – which is its highest margin segment – is also its fastest growing. Services grew by a solid 14% over the holiday quarter, compared to the hardware business, which expanded by a mere 1.5%. Services margins stood at a solid 75% over Q1 FY’25 compared to about 39% for the hardware business. As Apple continues to expand its services operations, it could help to partly offset the impact of the pressure on its U.S. hardware business.

Now, even after implementing these strategies, Apple could still see its U.S. margins take a hit in the near term, by, say, 10% or so. That said, Apple’s stock could weather the storm. The U.S. likely accounts for about 25%-30% of Apple’s total revenue and has remained one of Apple’s slower-growing markets in recent years. Apple’s growth in emerging economies such as India and South East Asia could hold up, and this could help reassure investors to some degree.

Moreover, Apple is viewed as a safe-haven stock, which has typically fared better than the market during downturns. During the inflation shock of 2022, AAPL stock fell 31.3% vs. a peak-to-trough decline of 25.4% for the S&P 500. During the early days of the Covid-19 pandemic, AAPL stock fell 31.4% vs. a peak-to-trough decline of 33.9% for the S&P 500. However, during the current drawdown, Apple’s decline has been roughly 2x that of the S&P 500. This gives us reason to believe the stock will bounce back as the dust settles and the company optimizes its supply chain.

Navigating Market Irrationality

Now, Apple stock has weathered severe storms before and emerged stronger. While the immediate outlook remains challenging, Apple’s strong device ecosystem and healthy financials provide a solid foundation for the stock’s recovery.

Surely, markets can remain irrational for extended periods, particularly when fear dominates sentiment. For long-term investors with patience and conviction, the current AAPL pullback may represent an opportunity. However, those uncomfortable with such volatility might consider a hedged approach or diversifying within a broader portfolio, such as the Trefis  Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors, or consulting a financial advisor with experience in bear markets could be beneficial. Remember, significant wealth can be generated in the market by those who maintain a calm and strategic approach during periods of volatility.

[1] Returns as of 4/9/2025
[2] Cumulative total returns since the end of 2016

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