Apple has introduced a new, more affordable iPhone model, the iPhone 16e, capable of running artificial intelligence applications. This announcement comes as the tech giant navigates the challenges posed by new tariff policies under President Donald Trump. Bank of America analyst Mohan has evaluated scenarios where Apple might need to increase prices in the United States to counteract the tariffs. According to Mohan, Apple would need to raise iPhone prices by approximately 9% to mitigate the impacts of these tariffs.
In Wednesday's trading session, Apple's shares experienced a slight uptick, narrowing its year-to-date loss to 2.3%. The company has been closely watched amidst ongoing discussions regarding tariffs. Mohan's analysis suggests that a 9% price hike could result in a 5% decrease in the number of devices sold. This scenario presents a significant challenge for Apple as it strives to balance maintaining competitive pricing while offsetting additional costs.
Currently, about 15% of iPhones are manufactured in India, following years of strategic shifts in production to the country. The reciprocal tax associated with these tariffs is expected to exceed the 10% fee imposed on China. Bank of America projects that Apple will need to raise prices on its iPhones, iPads, and other products by 9% to manage these costs effectively. If Apple refrains from increasing prices, it could face a loss of 26 cents per share, or 3.1%, in earnings for the 2026 calendar year.
Alternatively, implementing a more modest price increase of around 3% could still result in a 21-cent drop in earnings per share, equating to a 2.4% decline for the same period. The tariffs, described as "manageable" by Mohan, were implemented following President Trump's signing of a memorandum that introduced "reciprocal tariffs" on foreign nations.
Despite these potential challenges, Mohan reiterated his buy rating on Apple stock. He maintains a price target of $265, suggesting an 8.4% upside over Tuesday's closing price. As Apple maneuvers through this complex landscape, it remains focused on innovation and strategic market positioning.
Leave a Reply