SCOTUS ruling & US-China trade war 'not a threat' to Apple's growth potential

Although there's a "very real risk" from more tariffs on Apple products, and this week's Supreme Court ruling laid the groundwork for a challenge to the App Store, neither is a "threat to future growth potential," Cowen analysts said on Tuesday.

The impact from both problems "can be moderated over time," Cowen said in an investor memo. "We maintain our positive view on Apple stock and believe our thesis for Services business growth and stable hardware product sales longer term remains under-appreciated by the market," the firm wrote.

Cowen nevertheless warned that Apple's earnings per share (EPS) could be slashed by 14% if an expansion of Trump administration tariffs on Chinese goods takes effect in June. That could see a 25% levy on products like iPhones, iPads, and MacBooks, which are primarily assembled in China by companies like Foxconn and Pegatron.

iPhones alone could knock 6 to 7% off EPS, Cowen said. That's assuming Apple decides to absorb the hit from tariffs — if it hikes prices to compensate, EPS could drop $0.14 to to $0.58 per share, based on "demand destruction" of 10 to 40%. That would amount to 1 to 4% of forecast fiscal 2020 EPS.

The Supreme Court ruling "increases the probability that Apple may have modest financial risk due to monetary awards," the memo continued. While it only allows the Apple v. Pepper case — over App Store monopoly accusations — to continue, should the plaintiffs win, Apple could end up paying between $3.1 billion and $9.2 billion in compensation if it doesn't settle out of court.

Thankfully for Apple, Cowen noted, it could be 18 to 24 months before any payouts happen, assuming it doesn't emerge victorious.

Cowen is holding onto an "outperform" rating for Apple stock with a $245 price target.

29 Comments

spice-boy 1450 comments · 8 Years

About 5 years ago

So glad Apple will not be directly affected by #45's global intimidation scam, however the global economy may not agree with your assessment. This will impact many more companies, countries and economies than just China.

lkrupp 10521 comments · 19 Years

About 5 years ago

spice-boy said:

So glad Apple will not be directly affected by #45's global intimidation scam, however the global economy may not agree with your assessment. This will impact many more companies, countries and economies than just China.

So what’s your solution to China's blatant thievery of technology and intellectual property, and the dumping of Chinese steel and other durable goods at prices no American producer can match? Keep “talking” to them in hopes they will mend their ways? When someone comes in with the predictable negative response to these tariffs I always ask what solution they recommend other than simply capitulating to China and accepting our new role of a second rate economy controlled by and at the mercy of China.

So let’s hear your solution. Or is it just because #45 is doing it and that makes it bad?

hammeroftruth 1354 comments · 16 Years

About 5 years ago

lkrupp said:

spice-boy said:

So glad Apple will not be directly affected by #45's global intimidation scam, however the global economy may not agree with your assessment. This will impact many more companies, countries and economies than just China.

So what’s your solution to China's blatant thievery of technology and intellectual property, and the dumping of Chinese steel and other durable goods at prices no American producer can match? Keep “talking” to them in hopes they will mend their ways? When someone comes in with the predictable negative response to these tariffs I always ask what solution they recommend other than simply capitulating to China and accepting our new role of a second rate economy controlled by and at the mercy of China.

So let’s hear your solution. Or is it just because #45 is doing it and that makes it bad?

I think spice-boy’s post echos a lot of people’s frustration about these tarrifs and whether they have helped or hurt Americans and our economy.

Your points are valid about the crimes China has committed, but is #45’s solution helping, or hurting us in the long term?
It doesn’t help when it appears that #45 does not know how tarrifs work and who will bear the brunt of higher costs.

The flip side is that Wall St. acts hysterically whenever the threat of any punitive measure is talked about.

sdw2001 17459 comments · 23 Years

About 5 years ago

spice-boy said:

So glad Apple will not be directly affected by #45's global intimidation scam, however the global economy may not agree with your assessment. This will impact many more companies, countries and economies than just China.

This doesn't even make sense. A global intimidation scam? To what end? Agree or disagree with the actions he's taken, do you concede China is a real problem when it comes to trade, intellectual property, etc? What would be the endgame of such a "scam?"