Apple is the big winner of global trade talks at the G20 summit in Osaka, Japan.
That’s according to Wedbush analyst Daniel Ives. Ives notes that Apple has become the “poster child” for the U.S. vs. China trade war. As a result, the news that trade talks will resume between President Donald Trump and China’s President Xi Jinping is a winner for Apple.
Making concessions
During the G20 talks, Trump conceded that he will allow U.S. companies to continue to sell to Chinese tech giant Huawei. He also said, following the meeting, that the U.S. will not add tariffs on approximately $300 billion worth of Chinese imports.
These tariffs would have disproportionately hurt tech companies, which carry out much of their manufacturing in China. The tariffs would have kicked in July 2, had no agreement been reached.
Recently, a lobbyist for a group of tech giants including Apple warned that tariffs on Chinese products would cause prices to soar. Concerns about trade have been one reason for Apple asking its suppliers to explore manufacturing outside of China.
What impact will this have?
Wedbush analyst Daniel Ives writes that:
“[W]ith the positive step in the right direction announced between the two countries to not levy additional tariffs while negotiations continue, in essence this takes away the biggest risk on the Apple story (for now) in our opinion.”
Ives writes that “mathematical gymnastics and doomsday predictors” has convinced Wall Street that Apple would suffer in a big way with new tariffs. (He cites the figure $2 earnings per share.)
“From a scenario perspective, we believe a resolution to the China tariff situation could add between $20-$25 per share to Apple’s stock over the coming months in our opinion, as this would take away the dark cloud currently shadowing the stock. While many on the Street still need to see what FY3Q (June) results look like specifically out of the China region with many yelling fire in a crowded theater, we believe this weekend’s developments out of the G20 starts to remove the albatross around Cook’s neck which remains the China trade war situation.”
Ives also thinks that Apple won’t push for manufacturing outside China if an agreement is reached. That’s bad news for places like Vietnam and India, which could benefit from the addition of new factories. However, it’s good for reducing uncertainty on Apple stock. It’s also good news when it comes to reducing inevitable teething problems in moving Apple’s whole supply chain.
Great news for AAPL
It’s important to remember that this is still more of a truce than a resolution, though. There’s still a chance that this issue flares up again in the near future. But for now it’s certainly good news. I’d be very surprised if we didn’t see a valuation bump on AAPL in the days and weeks to come.
Whether it’s enough to drive it back over that vaunted $1 trillion market cap remains to be seen.
