By coinnews 
00:00 Speaker A
It has been a rough quarter for Apple with tariffs, supply chain issues and the company’s still recovering from a botched Apple intelligence rollout in the view of many investors. Apple is reporting earnings after the close on Thursday, and our next guest says it is one of the most anticipated earnings calls for Apple ever. For more bringing in Tom Forte, managing director and senior consumer internet analyst at Maximum Group. Tom, it’s great to see you. Most an, one of the most anticipated ever, talk to me about why that is please.
00:48 Tom Forte
Yeah, so as a long time follower of the company dating back to when Steve Jobs ran it. Uh I’m very curious to see how Tim Cook is going to manage tariffs, supply chain and all the issues that are facing the company. Uh I was very, you know, interested to see that they shipped two billion dollars of iPhones from India as a way to mitigate the tariff impact. So I think this is must, must watch TV, must listen to earnings call. I’m very much looking forward to it.
01:49 Speaker A
Tom, you know I was speaking to another Apple analyst today, um smart longtime Apple watcher like yourself, Tom, and he really thought, listen, he agreed. He thinks tariffs are front and center, uh this quarter for Apple. It’ll be tariff question after tariff question to call, he thinks. I guess, you know, how you are thinking through it yourself though, Tom. I mean the question is going to be posed to Tim Cook in some fashion of basically like how are you navigating the potential Trump tariff impact? You know, what is the strategy? What is the game plan? What do you think he’s going to say there?
02:53 Tom Forte
So three thoughts. So listening to Tesla last week, Josh, uh it occurred to me, could Apple do something similar, which is make its products on a regional basis like Tesla’s doing. So could they make iPhones both in the US, and China and India. The challenge there would be being able to do it at a reasonable cost in the US. Uh second, I think when it comes to tariffs, it’s ultimately how much can a company rely on suppliers to bear the incremental cost? How much of the incremental cost will the company bear itself? And how much will they attempt to pass on to consumers? And in that regard, I think Apple has, you know, premium brand, uh sells higher priced items. So they do have some pricing pressure, or pricing power. But uh certainly interesting uh situation for Apple.
04:26 Speaker A
I mean there’s pricing power and then there’s pricing power time. And when we’ve heard um estimates from some of your peers on the street about how much producing phones in the US could cost in terms of the finished product. And we’re talking huge figures here, we’re talking maybe a doubling of price. Do you think that’s an exaggeration? And do you think that consumers would, would bear that cost, would be willing to pay it?
05:04 Tom Forte
I, I don’t think it’s an exaggeration as far as, you know, if there’s a hundred percent tariff on items made out of China, Apple’s items are not exempt. Uh how much could that increase the cost if an iPhone were made in the US? Uh at the same time, I think some of the narrative on Apple is just too negative. So what you’ve seen in the many instances is that the carriers are bearing the incremental cost. They’re passing on heavy promotions to consumers. So I think they’re, you know, while I think the next 12 months and 18 months is challenging for Apple, uh if you look at the things that have happened in the past such as a high level of promotional activity by the carriers, or simply moving production to a lower tariff country, India versus China. So I think it’s going to be challenging but perhaps maybe not as challenging as some people fear.
06:32 Speaker A
You know, Tom, the stock is down heading into this print. It’s down about 15% year-to-date. I mean, how much of the, the potential bad news do you think is already priced in here?
07:00 Tom Forte
Yeah, so I think Josh, you’ve hit the nail on the head there, which is the quarterly earnings is really all about how much of the bad news is priced in there. So they had a double digit decline in sales to China in the December quarter. Let’s assume they had another double digit decline in the March quarter and are on pace for another double digit decline in the June quarter and then margin compression from tariffs. I think that down 15% might be tested. Uh there is potential that the near term performance could be even weaker than that and maybe the shares come under pressure uh on Thursday.