iPhone 17 faces dual pressures of tariffs and slowing growth, Jefferies lowers Apple target price

According to Zhitong Finance APP, Jefferies stated that due to the product mix of the iPhone 17 and tariff issues, Apple's (AAPL.US) profit margins are at risk, while also noting that the momentum for the new iPhone is "continuing to cool." The firm lowered its target price for Apple stock from $205.16 to $203.07 and maintained its "underperform" rating.

Analysts led by Edison Lee indicated that Apple may not be able to fully avoid the impact of tariffs. The analysts added that not only is the current tariff exemption status for smartphones likely to change, but the market is underestimating the uncertainty risks brought about by the U.S.-India and U.S.-China tariff frameworks.

The analysts pointed out that U.S. President Trump has imposed an additional 100% (now 30%) tariff on imported goods from China, and it remains uncertain whether smartphones imported from China will continue to receive exemptions.

Lee and his team stated: "As Apple is unlikely to rely entirely on Indian production capacity to meet 100% of the U.S. demand for the iPhone 17, we estimate that if the portion of iPhone 17 exported from China to the U.S. incurs a 130% tariff, it could impact Apple's earnings per share by about 5% for fiscal year 2026. This estimate may still be optimistic, as the demand for other Apple products in the U.S. market may also not be fully met by non-Chinese production capacity, not to mention the 20% tariff framework imposed on Vietnam."

The analysts added that the market may believe that given Apple's commitment to invest $600 billion in the U.S., it will receive exemptions regardless, but if U.S.-China conflicts escalate further, Apple may face greater pressure from the Trump administration to produce iPhones domestically. The analysts noted: "This is detrimental to profit margins."

Lee and his team indicated that the sales momentum for the iPhone 17 has shown further signs of slowing down. They added that the base model continues to perform strongly due to effective price reductions and more aggressive pricing in the Chinese market to take advantage of government subsidies.

Analysts expect that in fiscal year 2026, the base model of the iPhone 17 will account for 36% of total sales for the 17 series, up from 32% for the base model of the iPhone 16 in fiscal year 2025.

iPhone 17 Market Dynamics

In another statement, Lee and his team indicated that their latest tracking data shows that delivery wait times for the iPhone 17 Pro/Pro Max are mostly shortening across the six markets they track. This trend is most consistent for the 17 Pro Max, with wait times in all six markets decreasing over the past two weeks, and wait times in the UK/Germany have dropped to zero.

For the 17 Pro, wait times have also been decreasing in recent weeks, except for Japan, with wait times in the UK and Germany also dropping to zero. The analysts added that the wait time for the base model 17 remains the best among the four models (17 to 22 days), although wait times in the U.S. and UK have fallen to single-digit days "Therefore, we believe that the 17 base model remains the strongest selling model in the 17 series, and its sales mix will be more inclined towards the base model than last year. For the 17 Air, the wait time remains zero in all six markets we track. Thus, we consider the 17 Air to be the weakest among the four models, which is contrary to market expectations. However, if China approves eSIM within the next two months, it may provide some support for the 17 Air, but this could come at the expense of demand for the 17 Pro," Lee and his team stated.

Analysts noted that their tracking also shows that, except for the 17 Pro Max in the Hong Kong market, the wait times for the 17 Pro and Pro Max are currently lower than the same period last year (compared to the same period last year for the 16 Pro/Pro Max). Meanwhile, the wait time for the 17 base model is significantly higher than the same period last year (when the wait time was zero in all six markets), indicating that its demand is much stronger than that of the 16 base model.

Analysts added that the resale price trends are mixed, with the resale price of the 17 Pro declining, while some models of the 17 Pro Max have seen an increase in resale prices