Shares of Apple Inc. (NASDAQ: AAPL) slumped 0.22% yesterday to close at $174.24 after President Trump announced that tariffs could be placed on iPhones, which are produced in China. The news pushed the technology giant‘s market capitalization below Microsoft but managed to regain the lost position at close. With a market cap of $822.23 billion, Microsoft is just $4 billion behind Apple’s $826.83 billion. Since the end of October, Apple’s market cap has dropped by about $210 billion, while Microsoft’s market cap has eroded by about $2.6 billion. Notably, Apple’s stock has lost over 20% in the past three months while the Dow Jones Industrial Average DJIA has declined only 5.4%.
Apple’s China problem
Apple’s stock started the week on a gloomy note after President Donald Trump revealed his plans to expand import duties on Chinese goods and, particularly, slapping tariffs on Apple’s iPhones. More broadly, Trump stated that he anticipates going forward with raising tariff levels on $200 billion worth of Chinese goods.
Notably, Trump is scheduled to meet with Chinese President Xi Jinping later this week in Argentina at the G20 meeting. However, Trump’s rhetoric has diminished the chances of a breakthrough at the conference. Without a new deal in place, higher US tariffs on Chinese products are set to go into effect on January the 1st.
Fears of a likely 10% import tax on iPhones turned Apple’s stock bearish on Tuesday, and analysts opine that the stock could face additional sales pressure this week before the Buenos Aires G20 summit.
To date, iPhones have been exempted from Trump’s 10% trade war duties on imports of Chinese merchandise worth $200 billion. However, only four days before the G20 meeting with Chinese President Xi Jinping, Trump said he would not hesitate to expand the United States tariffs on merchandise worth an extra $ 267 billion if a trade deal is not reached. These goods may include iPhones and laptops imported.
Regarding the iPhone tariff, Trump said: “Depends on what the rate is. I mean, I can make it 10%, and people could stand that very easily.”
Trump further stated that he still intends to hike the rate of prevailing tariffs on China from 10% to 25% starting on January the 1st.
Wedbush analyst, Daniel Ives, opined Trump’s statement adds to the present “white knuckle” period for Apple, which has lost momentum due to a “litany of bad news” including reports of a weaker demand for iPhones.
In a note to clients, Ives says: “With [average selling prices] for the iPhone in the $800 range and consumers clearly price sensitive around higher smartphone prices the last thing [CEO Tim] Cook and investors want to see is additional tariffs added to iPhones and impacting demand drivers at this crucial growth juncture for the company.”
“While we are taking a wait and see approach around if this talk is more bark than bite from the Trump administration, we could see a negative knee-jerk reaction to this latest tariff news in Apple shares.”
Fundamentally, the stock is expected to remain weak due to the issues mentioned above.
Technically, the stock has broken below its 50-day moving average. Furthermore, the MACD indicator is making new lows in the negative zone. As a result, we can expect the stock to remain bearish in the short-term.
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