Rosenblatt analyst Barton Crockett has maintained a Buy rating and a $263 price target on Apple Inc AAPL.
Apple’s fiscal second-quarter earnings report after markets close today will be an exercise in navigating policy minefields, Crockett wrote in a research note published Thursday. Because of all the U.S. policy flip-flops, Apple’s performance this quarter is unlikely to be meaningfully indicative of long-term value and positioning.
Also Read: Apple Plans iPhone Shift From China To India Amid Tariff Pressures, Geopolitical Risks: Report
While President Donald Trump exempted Apple’s core products — smartphones, and consumer electronics — from the harsh 125% tariffs slapped on imports from China effective April 10, the world’s most valued company is still subject to the 20% “fentanyl” tariff that started March 4.
Production in India is subject to the global 10% tariff that came into effect on April 5.
China has begun offering 15% subsidies for smartphone purchases as an economic stimulus. However, this was capped at $820, meaning most iPhones (other than the base iPhone 16 model) could not capture the discount.
Apple rushed to stockpile smartphones ahead of tariffs, resulting in a 10% rise in Apple’s global iPhone shipments in the first quarter of 2025, according to IDC. However, Apple’s limited exposure to China subsidies resulted in a 9% unit decline in China for Apple smartphones, according to IDC, losing share in a market that grew 3% overall because of the subsidies.
Revenue recognition occurs when the phone’s control transitions to the buyer, typically the retailer but the consumer in Apple’s direct iPhone sales. There were periods of strong demand driven by tariff fears that would likely be beyond Apple’s guidance for low to mid-single-digit total revenue growth in the March quarter, with consensus sitting near the high end. So, there may be a revenue upside potential in the fiscal second quarter of 2025. The risk would be to margins because of the cost of all these machinations.
Apple guided for a March quarter gross margin of 46.5%-47.5% (~ flat to up 90 bps Y/Y) when it reported the December quarter on January 30. Apple has not warned and can be conservative about such things, suggesting the headline numbers are OK. Notably, indications are that the new lower-priced iPhone 16e introduced in the quarter is selling well.
The following quarter’s guidance will be telling, as that will factor in the impacts of the new tariffs, Apple’s efforts to ramp up production in India, and demand after the tariff buying rush faded. Overall, this feels like an area of risk to Apple, although Crockett noted it is entirely possible the company withholds specific guidance. Services, a double-digit grower, the analyst noted is probably holding up reasonably well.
Apple faces public pressure from Trump to move iPhone production to the US, which can’t seriously happen at substance and scale. However, Apple may be limited in its ability to say that directly because of political risks. They also may not be able to raise iPhone prices ahead now to cover tariff costs because of political risks and the price sensitivity of consumers. However, tariffs may prompt a step up in pricing for the following iPhone models, likely in September. The best outcome for Apple would be a quick end to the trade war, which Crockett noted is possible.
Crockett projected second-quarter revenue of $95.52 billion and EPS of $1.65.
AAPL Price Action: Apple stock is up 0.39% to $213.32 at the last check on Thursday.
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