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UBS Says Apple Can Reduce Impact of Tariffs; Not a Big Deal -- But That May Mean the Selling is Overdone

UBS Says Apple Can Reduce Impact of Tariffs; Not a Big Deal -- But That May Mean the Selling is Overdone



UBS Says Apple Can Reduce Impact of Tariffs; Not a Big Deal -- But That May Mean the Selling is Overdone


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Disclaimer

The results here are provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation.


LEDE

UBS analyst Timothy Arcuri sent a note to clients today emphasizing that the impact of tariffs on Apple could be mitigated and would be incremental at worst.


Story

On 11-26-2018 CMLviz reported that Apple iPhones Will Face Tariffs Soon and all Chinese Imports May be Next if Negotiations Don't Go Well in Upcoming Summit.

Today we get one analyst's opinion, which may alleviate some fear around a disastrous outcome, according to Markets Insider.

While the entire world watches the upcoming G20 summit to see if China and the United States will come closer to a trade deal, if the two countries leave with a sour taste in their mouths, UBS still feels that Apple will be hurt only incrementally.

Arcuri said:
It is unclear whether the incremental tariffs would be at 10% or 25%, but assuming a 10% rate, we estimate an earnings per share impact of ~$0.33 (~2.5%) on our baseline F2019E EPS of $13.06 assuming implementation in March quarter and assuming Apple would absorb the incremental costs rather than passing them on to consumers.


Selling Overdone?

For a look at current estimates, we turn to the Analyst Tab on this site (www.CMLviz.com). We will start with revenue estimates.


Even with the wave of seemingly bad news surrounding iPhone demand irrespective of the tariffs, Wall Street analysts as surveyed by Factset still show Apple growing revenue from $279.5 billion to $291 billion.

Next we can look at earnings per share (EPS). We can see that analysts are calling for current fiscal year EPSof $13.42 and see that increasing to $14.87 next fiscal year.



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Those EPS numbers imply a next fiscal year forward PE ratio of 11.63 for Apple, well below the S&P 500's current PE of 21.86.



WHAT HAPPENED

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Thanks for reading, friends.

The author is long shares of Apple, at the time of this writing.

Please read the legal disclaimers below and as always, remember, we are not making a recommendation or soliciting a sale or purchase of any security ever. We are not licensed to do so, and we wouldn't do it even if we were. We're sharing my opinions, and provide you the power to be knowledgeable to make your own decisions.

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