Apple flexes muscles as Trump, Cook tour facilities

'Always helpful when you have the president's ear'

President Trump and Apple CEO Tim Cook will tour facilities in Austin, Texas, on Wednesday where high-end Apple computers are assembled.

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The tour comes as Apple shares are on the verge of capping off their best year in a decade, up more than 69 percent, according to Dow Jones Market Data Group. The Cupertino, Calif.-based company has a $1.18 trillion market capitalization and is the biggest U.S. corporation.

TickerSecurityLastChangeChange %
AAPLAPPLE INC.265.96-4.75-1.75%

Its CEO and Trump have developed a friendly relationship, with the president praising Cook in August for being one of the few tech CEOs to pick up the phone. "Others go out and hire very expensive consultants, Tim Cook calls Donald Trump directly," the president told reporters at the White House.

Since then,  Apple shares have been a standout, marching to record highs not because of the Cook-Trump friendship but because “expectations for the iPhone 11 model year have been better than previously expected," RBC Capital Markets analyst Robert Muller told FOX Business.

Muller, who has an outperform rating on the shares and a $295 price target, said there had been concern it might be “a slower year leading into the 5G upgrade.”

He said Apple’s “ongoing services shift has continued to be successful.”

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Wedbush analyst Dan Ives told FOX Business there are a few core drivers behind Apple stock's all-time highs.

The install base of the current upgrade cycle is “much stronger than Wall Street anticipated,” especially for the iPhone 11, which has been 15 to 20 percent above expectations, he said.

Additionally, Apple’s China business has been booming despite the trade war. By his estimate, Apple will convert about half of its base of 110 million users to the iPhone 11.

Ives thinks Apple shares, which have traditionally traded at 12 to 16 times earnings, depending on the upgrade cycle, are being rerated by Wall Street due to the strength of its services business, which he says is worth $500 billion as a standalone company. Apple will eventually trade at a price-to-earnings multiple in the low 20s, he predicts, and shares could hit $325 or even $350.

Ives has called Apple the “poster child” of the U.S.-China trade war, and says the tech giant has the “most to lose” as new tariffs slated for Dec. 15 would “result in a 4 percent hit" to per-share earnings. Still, he believes implementation of the duties is unlikely.

They would cover $156 billion of goods made in China, including iPhones. Apple has already had to pay tariffs on a number of its other products.

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“This week's visit by Trump speaks to the careful balancing act that Cook and Cupertino find themselves in around ramping up U.S. production for some core products, while making sure its golden jewel iPhone manufacturing footprint in China with Foxconn remains Teflon-like during this US/China trade battle,” Ives wrote in a note to clients out Monday.

Wednesday's meeting will mark the second time in just over three months that Apple's leader has had face time with the president.

At a White House dinner with Trump on Aug. 16, Cook laid out his concerns on tariffs, while the president expressed his wish for the tech giant to invest in the U.S.

On Sept. 23, Apple announced its redesigned Mac Pro would be assembled in Austin. Three days prior, U.S. trade officials approved exemptions that allow Apple to import key Mac Pro parts from China without being subject to tariffs.

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“It's always helpful when you have the president's ear,” Muller said. “It can help make the case in terms of not implementing tariffs.”