KeyBanc says smartphone tariff exception is ’best-case scenario’ for Apple

Investing.com -- Apple shares (NASDAQ:AAPL) jumped at the end of last week after the U.S. granted an exception for smartphones from the latest round of reciprocal tariffs, a move KeyBanc analysts described as “probably the best case scenario we can think of for AAPL.”

The brokerage upgraded the stock to Sector Weight from Underweight, noting that the exemption “takes a big risk off the table.”

The new guidance issued late Friday to U.S. Customs and Border Protection excluded smartphones and several other electronics from incoming tariffs. This unexpected carveout marks a major shift from the escalating trade war concerns seen just a week earlier.

Compared to a week ago when we thought an escalating trade war and potentially more significant actions by China were likely, with this becoming the new "base-case", meaningful risks are removed,” KeyBanc analyst Brandon Nispel said in a note.

But Nispel cautioned that Apple still faces structural challenges. High investor expectations for fiscal year 2026 (FY26) growth and mounting scrutiny over its AI strategy could weigh on sentiment.

“AAPL’s thus-far failed approach to AI remains a question,” the note said, pointing to delays in Siri upgrades and limited AI service rollouts compared to peers. Legal risks tied to the Department of Justice lawsuit involving Google (NASDAQ:GOOGL) may also impact Apple’s services segment.

While KeyBanc no longer sees further downside, Nispel believes the stock’s valuation is now more reasonable following the recent pullback. 

“We generally believe Apple is fairly valued,” he noted, with shares trading near 18 times expected EV/EBITDA and 23 times price-to-free-cash-flow, in line with its 10-year average.

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