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Apple (AAPL) warned investors about a $900 million hit from President Trump's tariffs. Needham & Company senior media and internet analyst Laura Martin tells Madison Mills and Brad Smith that the iPhone maker would be best positioned if the company absorbs the increased costs of tariffs rather than passing the costs on to consumers.
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Joining us now, we've got Laura Martin, Needham and Company's senior media and internet analyst. Laura, great to have you. I do want to start on Apple. You've got a buy rating and a $225 per share price target here. That almost $1 billion hit for Apple though in just one quarter off the back of these potential tariff implementations here. Can Apple really survive these tariffs in the short term?
So, one of the things they said yesterday was that almost all of their U.S. demand will be met by India and Vietnam, um, starting next quarter. So, iPhone will be coming out of, um, India and, uh, Vietnam will be doing iPads and wearables and Macs. So, and then they're going to spend $500 billion. They've committed to Donald Trump over the next four years to bring a lot of that production into the U.S. So I think they're trying to pivot away, and then China will meet the rest of world needs where there isn't a tariff problem.
And so this business, most of it, half of it is still essentially the iPhone here. And so ultimately, what are we seeing them do? What did you hear that sticks out on what they may need to do with pricing in this interim period of time where we know the consumer and the sentiment has wavered?
Right. I think they're going to need to take margin pressure. I think you're going to see their earnings per share fall because I think it's better for them to maintain their installed base by cutting price and driving unit sales, um, during this period of tariffs. So I expect Apple to eat some or all of the tariff increases and then let that extra cost fall to the bottom line. But on the consumer side, I think they'd be smart to keep the prices steady.
What is an acceptable range for margin pressure that you would be anticipating?
Well, they said it was going to cost them an extra $900, um, million billion dollars in the June quarter, and I expect all of that to, and they took it in their guidance, to hit hit the EPS line. So basically they they basically told you they're going to eat the entire extra cost and not raise price.