Tech giant Apple (AAPL) delivered solid second-quarter results, but analysts are increasingly worried about how tariffs could hurt its gross margins later this year. Indeed, J.P. Morgan, led by five-star analyst Samik Chatterjee, called the results resilient and better than feared, but lowered its price target to $240 from $245 due to higher potential tariff costs. Jefferies was more negative, as it downgraded the stock to Sell after noting that product gross margins in March fell to their lowest level in five years. It also warned that for every 1% increase in tariffs, Apple’s Fiscal Year 2025 pre-tax profits could drop by 1.5%.
Some analysts, however, maintained a more positive stance. For example, Morgan Stanley kept its Overweight rating, although it believes Apple shares may stay range-bound for now. Still, Morgan Stanley pointed out the progress that Apple is making in moving production out of China, as only $900 million in tariffs are expected in the June quarter. Even though Apple still makes most of its products in China, CEO Tim Cook said that about half of iPhones for the U.S. are now made in India, while products like iPads, Macs, Apple Watches, and AirPods mostly come from Vietnam.
Separately, Bank of America and Wells Fargo also maintained positive ratings, but expect pressure on margins to continue throughout the year. Interestingly, Wedbush was more optimistic, as it raised its price target to $270 and said that Apple has handled the tariff issue well. Analyst Daniel Ives said the company now has breathing room to avoid supply chain issues and stay on track for the iPhone 17 launch. He also credited Cook for skillfully managing this complex situation.
Is Apple a Buy or Sell Right Now?
Overall, analysts have a Moderate Buy consensus rating on AAPL stock based on 18 Buys, seven Holds, and three Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average AAPL price target of $233.37 per share implies 13.7% upside potential.
