Investors Eye Potential Upside in Apple and Meta Amid Tariff Struggles
The ongoing tariff situation has taken a toll on various stocks this year, with even major technology firms feeling the impact for the first time in more than two years. The Roundhill Magnificent Seven ETF, which tracks stocks known as the “Magnificent Seven,” has dropped nearly 18% this year. As uncertainty looms, investors are reassessing their options, zeroing in on stocks that are currently valued at their lowest in over six months.
Despite the challenges, many investors remain optimistic about artificial intelligence (AI) and believe that the Magnificent Seven, notably Apple (NASDAQ: AAPL) and Meta Platforms (NASDAQ: META), could see significant gains. Both companies have experienced downturns, with Apple and Meta falling approximately 17% and 13% respectively as of April 15. Wall Street analysts are highlighting the potential for recovery in these stocks.
Apple’s Potential Upside of 18%
In the wake of President Donald Trump’s tariffs, Apple has found itself in a precarious position. The administration announced increased rates on many imports, particularly affecting China, where Apple manufactures more than 80% of its products. Analyst Dan Ives from Wedbush estimates that producing an iPhone in the U.S. could push costs as high as $3,500. Furthermore, he indicated that moving just 10% of its supply chain back to the U.S. could cost Apple around $30 billion over the next three years.
Although Trump has temporarily halted some tariff rate increases, the 145% tariffs on products from China remain. Meanwhile, recent communications from the White House suggest a willingness to negotiate with China, with smartphones and electronics currently exempt from these tariffs, albeit not permanently.
In a recent note, Ives projected Apple’s earnings for 2025 and 2026 may decline by 10%, potentially dropping 15% to 20% if no trade deal is reached. Despite short-term challenges, he maintains a long-term bullish stance on Apple. Out of 33 analysts who have published research in the past three months, 17 rated the stock as a buy, while 13 advised a hold, and three recommended a sell. The average price target sits at approximately $238, suggesting an 18% upside from current levels.
Despite the existing tariffs, the recent electronics exemption hints at potential relief for Apple’s products in the future. The company plans to invest $500 billion in the U.S. over the next four years, bolstering its position. With a strong brand and a solid balance sheet, Apple is well-placed to benefit from AI advancements. The stock currently trades at just below 28 times its forward earnings, close to its five-year average. Although some near-term challenges lie ahead, the company’s long-term outlook appears positive.
Meta Platforms Could See 39% Upside
In contrast, Meta’s business model is less vulnerable to supply chain issues since it does not produce physical goods like Apple. However, the economic ramifications of tariffs could impact revenue from advertising, which constitutes a significant portion of Meta’s income. Historically, ad budgets tend to shrink during economic downturns.
Nevertheless, Meta is considered a valuable platform for advertising spend. Analyst Malik Khan from Morningstar noted that during periods of economic uncertainty, companies tend to favor high-return platforms, making Meta a priority for ad spending. Recent reports have shown that 46 analysts covering Meta have rated it with 42 buy recommendations, three holds, and one sell. The average price target of about $726 implies a robust 39% upside.
Meta was positioned favorably even before the tariff situation escalated, due to its reputation as a key beneficiary of AI development. Experts see it as second only to Nvidia in benefiting from AI investments. Conrad van Tienhoven from Riverpark Capital highlighted that Meta’s AI spending has significantly improved ad targeting and measurement, leading to growth and increased revenue per user.
The potential for AI advancements in advertising is vast, including better data analysis and automated purchasing. Meta’s current price-to-earnings ratio sits around 20.8, closely aligned with its five-year average.
Considerations Before Investing in Meta
Before making an investment in Meta Platforms, investors should weigh certain factors:
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has investment positions in and recommends Apple, Meta Platforms, and Nvidia. The Motley Fool adheres to a strict disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
