Apple Shares Decline Despite Strong Earnings Amid Tariff Concerns

Shares of the consumer tech giant Apple (NASDAQ: AAPL) fell approximately 4% today at 11:14 a.m. ET, following the company’s earnings report released yesterday. Most stocks saw gains today due to favorable trade negotiations between the U.S. and China. However, ongoing tariffs continue to pressure Apple.

Analysts Reassess Apple’s Stock Outlook

Apple reported earnings and revenue in its second fiscal quarter that exceeded Wall Street’s expectations. Notably, iPhone revenue surpassed forecasts by $1 billion. Yet, Apple remains significantly affected by tariffs, as a large portion of its products are manufactured in China and Vietnam.

During the earnings call, CEO Tim Cook indicated that tariffs are expected to contribute an additional $900 million in expenses during the current quarter. Apple conservatively projected low-to-mid-single-digit annualized revenue growth for this quarter. Cook noted the difficulty in predicting future outcomes given the uncertainty surrounding tariffs.

This morning, several analysts opted to lower their price targets or ratings for Apple. Jefferies analyst Edison Lee downgraded Apple’s rating to underperform, stating that “tariff impact will expand over time to create more earnings downside.” Meanwhile, Barton Crockett from Rosenblatt Securities also reduced his rating from buy to neutral. He commented that Apple remains a well-managed company but needs a new, exciting product to drive growth in a fluctuating tariff and regulatory landscape.

Image source: Getty Images.

Future Tariff Reprieve May Not Resolve All of Apple’s Challenges

Following President Trump’s pause on tariffs, Apple has managed to recover from its lows and now trades at approximately 29 times forward earnings, just above its five-year average. While there may be some easing of tensions with China, future tariffs could still be significant, which means Apple might not receive a full exemption.

As a result, my outlook on the stock remains neutral. The tech giant has the potential for solid long-term performance, but it is not currently trading at a discount relative to its near-term challenges.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Jefferies Financial Group. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.