Apple stock tumbled for the second consecutive day on Friday amid fallout from the steep tariffs announced by President Donald Trump.
Morgan Stanley analyst Erik Woodring says investors want to know if Trump will give an exemption to Apple products as he did in 2018 during his first term in office.
"What are the odds that Apple gets tariff exemptions? This was the most frequently asked question yesterday, and we gauge the odds of a targeted tariff exemption for Apple at 20%," Woodring said in a client note.
The reason for the low odds has to do with how Trump is handling tariffs in his second term, Woodring said.
"During the first Trump administration, companies had weeks to formally respond to the USTR (U.S. Trade Representative) Section 301 tariff lists and provide feedback/reasons for specific product exemptions," Woodring said. "This time, the Trump administration has implemented global tariffs through the International Emergency Economic Powers Act (IEEPA), which means no formal product list was presented in advance, and there is no official process for requesting tariff exemptions."
He added, "Therefore, for Apple to receive an exemption, it would have to be a company (or product, i.e. smartphone) specific exemption granted specifically by the president. At this point, we believe it is unlikely (but subject to change)."
Woodring rates Apple stock as overweight, or buy, with a price target of 252.
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Apple Stock Continues To Dive
On the stock market today, Apple stock fell 7.3% to close at 188.38. On Thursday, Apple stock tanked 9.3%.
Woodring estimates that the Trump tariffs could cut Apple's 2026 earnings per share by 12%. That assumes hardware price increases and other tariff mitigation efforts. Without mitigation, Apple could face a 26% earnings-per-share headwind, he said.
Elsewhere on Wall Street, Needham analyst Laura Martin said the new tariffs could cut Apple's earnings by 28% in fiscal 2025. That assumes Apple doesn't get a tariff exemption, she said.
She calculates that Apple's earnings per share will fall by over $2 on a pro forma basis from the current consensus estimate of $7.32. That scenario assumes Apple does not raise prices in the U.S.
Martin believes Wall Street is betting there is a 30% chance Apple will get an exemption. That's based on Trump's prior exemption and Apple's pledge earlier this year to spend $500 billion in the U.S. over the next four years.
Martin rates Apple stock as buy with a price target of 260.
Apple makes most of its products, including iPhones and Mac computers, using contract manufacturers in China and Southeast Asia.
Apple stock is on the IBD Tech Leaders list.
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