By Dan Gallagher
What do you do when the most powerful person in the world demands the impossible? If you're an Apple shareholder, you better settle in for a long, uncomfortable haul.
Apple's share price took another tumble on Friday, after President Trump threatened to impose a 25% tariff on any iPhone made overseas. This is part of his push to have all iPhones sold in the U.S. made there as well. The stock has been on a mostly downward slope since Apple's disappointing earnings report on May 1 and has put the company's market value below that of Microsoft and Nvidia.
That's far from a worst-case scenario. Apple's share price Friday morning represented a multiple of about 26 times projected earnings for the next four quarters. That's nearly in line with the company's five year average, according to FactSet data.
That means more downside is possible-even for a stock now off 22% so far this year. If Trump's demands stick, Apple will likely simply pay the 25% tariff on its iPhones made in India and pass at least some of those costs on to its customers. That would be a far more palatable option than trying to move its massive, Asia-based supply chain to the U.S., which would take many years and hundreds of billions of dollars in a best-case scenario.
But paying the additional tariffs has its downside as well. In a report earlier this month, Edison Lee of Jefferies said every percentage point increase in tariffs above "current assumptions" translates into a 1.5% impact on Apple's pre-tax profits this year.
This analysis comes from the Journal's Heard on the Street team. Subscribe to their free daily afternoon newsletter here.
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(END) Dow Jones Newswires
May 23, 2025 14:00 ET (18:00 GMT)
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