Can Apple Dodge China Tariff Fallout Without Raising iPhone Prices? Analyst Sees A Path Amid Battered Retail Morale

Apple, Inc. (AAPL) stock shed another 4% on Thursday as the broader market sold off due to intensifying uncertainty around the Trump tariffs. 

As pessimism toward this consumer- and China-exposed company abounds, a Morgan Stanley analyst quelled some anxiety by suggesting non-pricing actions to work around the tariff dent. 

Morgan Stanley analyst Erik Woodring, who has an ‘Overweight’ rating and $220 price target for Apple stock, said, with an eye on the period beyond the upcoming June and September quarters, the company can implement measures to mitigate the impact of China import tariffs without resorting to like-for-like iPhone price increases.

Woodring suggested that Apple capitalize on the 90-day pause and look to its original device manufacturers (ODM) in India, namely Hon Hai, Pegatron and Tata, for ramping up production in India to help meet U.S. iPhone demand.

The analyst estimates that the company might have to double its India iPhone production to completely derisk U.S.-bound supply from China. 

Secondly, the Morgan Stanley analyst said Apple could eliminate low-end iPhone storage stock keeping units (SKU).  “If Apple is able to shift demand toward the higher-margin iPhone models, it can lessen the blow from China tariffs as India production also ramps,” he added.

Woodring also recommended leveraging financing plans and higher carrier subsidies/trade-in values to help offset  the synthetically higher iPhone prices.

Explaining further, the analyst said Apple could offer 24-month iPhone instalment plans on the Apple Card with a 3% cash back. If the instalment plan is extended to 36 months, monthly payments for a $1,099 iPhone would be reduced by 33% to $30 from $45, he added.

On Stocktwits, sentiment toward Apple stock  turned to 'bearish' (25/100) by early Friday from the ‘extremely bearish’ mood a day ago, and the retail chatter stayed at ‘extremely high’ levels.

A bearish watcher said Apple stock will drop to $160, adding that the level could prove to be a great entry point.

Another user said with China not responding to Trump’s overtures yet, there could be more downside for the Apple stock.

Apple stock fell 0.51% to $189.45 in Friday’s premarket session, while it is down 24% for the year.

Following the recent downward price target adjustments, the Koyfin-compiled consensus price target for the Apple stock is $239.60.

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