Citi Reiterates Buy Rating on Apple (AAPL), Keeps PT at $240

Citi reiterated its Buy rating on Apple (AAPL) with a $240 price target, with analyst Atif Malik downplaying the potential impact of a 25% tariff on Apple products imported into the U.S. Malik estimates a limited impact on Apple's business, projecting a 130-basis-point hit to gross margins or a 4% EPS impact in FY26, assuming Apple absorbs some costs and passes others onto consumers or suppliers. Despite Trump's threats, Apple and Foxconn continue to expand operations in India.

Analysis

Citigroup has reaffirmed its Buy rating on Apple Inc. (AAPL) with a $240 price target, as analyst Atif Malik projects a limited business impact from potential U.S. tariffs. Specifically, President Trump's threat of a 25% tariff on iPhones not manufactured domestically is estimated by Malik, in a bear case scenario, to result in a 130-basis-point gradual impact on Apple's gross margin or a 4% impact on its EPS by FY2026 for two-thirds of its U.S.-imported products. Malik's base case scenario considers a 20% tariff on China-sourced goods and 10% on those from India, with Apple anticipated to pass approximately one-third of these additional costs to consumers or suppliers. Despite these tariff discussions, Apple, along with its key supplier Foxconn, is actively expanding its manufacturing operations in India, signaling a continued supply chain diversification strategy. This financial assessment occurs against a backdrop of Apple maintaining a steady gross margin, reported at 47.1% in Q2 FY2025, and achieving TTM gross profit of $400.37 billion as of May 27, reflecting consistent margin performance in recent years.

Key Decisions for Investors

• Investors should consider Citi's Buy rating and $240 price target for AAPL, while closely monitoring the potential, albeit assessed as limited, gross margin and EPS impact from threatened U.S. tariffs.
• It is prudent to evaluate Apple's ongoing supply chain diversification, particularly its expansion in India, and its ability to mitigate tariff costs by passing them on to consumers or suppliers.
• Assess Apple's sustained gross margin performance, benchmarked at 47.1% in Q2 FY2025, as a key indicator of its resilience against potential import duties and operational shifts.