Image Source: Unsplash

Apple (Nasdaq: AAPL) shareholders breathed a collective sigh of relief over the weekend after the Trump Administration put the reciprocal tariffs on smartphones, computers, and other electronics on temporary hold.

It was not clear why from the notice published Friday evening from U.S. Customs and Border Protection. But for Apple, in particular, the steep 125% tariffs on China, would have had a devastating effect on its business, as some 80% to 90% of iPhones are made in China.

President Donald Trump did post on Sunday that this is a temporary reprieve, as smartphones and electronics will be moved to another “tariff bucket.” He added that these products are still subject to the initial 20% tariffs imposed on China back in February. Trump said the administration is also looking at something similar for semiconductors and the electronics supply chain.

So, at this point, it’s a pause, but surely welcomed news. Apple stock skyrocketed more than 7% at the opening bell on Monday, but steadily dropped from there as uncertainty set in. As of 12:00 p.m. ET, Apple stock was only up about 2% to $202 per share.  

Going forward, what, exactly, does this mean for Apple stock?

“Game changer scenario”

Trump said the idea is to get companies like Apple to make their products in the U.S. And Apple has been moving in that direction, proposing to invest $500 billion in manufacturing plants in the U.S. But that will take time take years, analysts say, and will still only represent a fraction of overall production.

But for now, analysts are taking this as a good sign for Apple, even though a great deal of uncertainty remains.

The 125%, or 145% including the initial 20% tariffs on China, was a nightmare scenario for Apple so this is an improvement, even though they are still subject to the 20% tariffs. What we don’t know is if any other tariffs will be assessed on electronics.

But Wedbush analyst Dan Ives was much more bullish after the news. “This is the dream scenario for tech investors. Smartphones, chips being excluded is a game changer scenario when it comes to China tariffs,” Ives told CNBC. “I think ultimately big tech CEOs spoke loudly, and the White House had to understand and listen to the situation that this would have been Armageddon for big tech if were implemented.”

But Ives also said Sunday in a research note that there “there is mass uncertainty, chaos, and confusion about the next steps ahead.” Wedbush maintained its $250 per share price target.

Analysts react

The news caused many analysts to review their price targets for Apple. KeyBanc updated its rating on Apple to sector perform, from underweight, and said its low-end price target of $170 per share was no longer in play.

DA Davidson dropped its price target by $60 per share to $230, but that’s still a sizable increase over the current $202 per share price. Citi also dropped its price target by $30 per shar down to $245 per share.

Conversely, analysts at JPMorgan Chase boosted their price target by $25 to $270 per share on the tariff reprieve.

The median price target among analysts is $250 per share, which would be about a 23% increase.

Is Apple stock a buy?

While this is all good news, investors should be cautious about a few things. One, tariffs on Apple are still going up, at least that 20% for the time being. Two, Apple sales were struggling even before any tariffs were announced, so added tariffs probably won’t help.

However, Apple had a solid sales quarter in Q1, according to new research from Counterpoint. Apple had the largest global market share in Q1 with 19%, followed by Samsung at 18%. But sales in the U.S., Europe, and China were flat or declining, while sales in Japan, India, Middle East and Africa, and Southeast Asia were up.

Counterpoint added that rising uncertainties surrounding tariffs are likely to hurt consumer demand, mainly in the U.S.

Also, Apple stock, while cheaper, still has a P/E ratio of 31. I think there is too much uncertainty to call it a buying opportunity just yet. Investors may want to wait for Q1 earnings for more visibility and more details on tariffs.

More By This Author: