Apple shares rose Tuesday morning after the Wall Street Journal reported that the U.S. and China are likely to agree to delay Dec. 15 tariffs that would apply to consumer electronics such as smartphones and other Apple devices. But the prospect for more gains for Apple might be muted after a strong run-up for the tech giant already in 2019.
Apple stock were rising rose 1.02% to $269.65 a share, as the S&P 500 rose 0.13%.
But Apple shares are up 71% year to date amidst optimism about many of Apple's businesses. Investors have recently begun to appreciate Apple's burgeoning services and wearables businesses, while iPhone 11's are selling well and 5G demand and production both look strong. One of the biggest 'X' factors for the hardware side of the business has been the trade war, and since early October, the U.S. market has risen considerably, partly on optimism about a trade deal being reached.
"There's limited upside for Apple in the near future based off just the trade deal alone," Shawn Cruz, trading strategy manager at TD Ameritrade told TheStreet.
Since Oct. 8, the which began the S&P 500's 8.5% up-move to date, Apple has risen 20%. As a result, any up-move in the broader market driven by trade issues could bring Apple shares gently higher, according to Cruz, but not significantly so. "If you get the tariffs delayed, that will be enough to give a pretty decent [broader market] rally," Cruz said. "[Apple] will [enjoy a move up] to the extent that they just get dragged higher, but I wouldn't expect them to be a stellar outperformer."
Even if the tariffs go into effect on Dec. 15, there's a chance that Apple could be exempted from them, as CEO Tim Cook has been lobbying for. But if they're not, Apple's fiscal 2020 earnings per share could fall by roughly 4%, according to analysts. The actual percentage decrease would depend on whether Apple decides to absorb the tariff impact, hurting gross margins, or chooses to raise its prices, hurting demand.
On a longer-term basis, some analysts expect Apple to be a solid performer for the next year or so, as the growing services business could provide solid earnings growth. Several analysts have price targets of above $300, reflecting at least 11.5% upside.