Shares of Apple (NASDAQ: AAPL) are currently 26% below their peak from December last year (as of April 10), a drop that has been spurred by ongoing tariff announcements. As of this writing, there is a huge 145% tariff that's implemented on goods leaving China for the U.S. If this remains in place, it could harm Apple, because 80% of its production is still based in China, according to estimates from Evercore.
For consumers, the result could be much higher prices. If the increased costs are eaten by Apple, on the other hand, its profitability will definitely take a hit. There remains a lot of uncertainty about how things will play out.
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Despite the potential effects, which are commanding all the attention these days, Apple has proven to be successful in another area that highlights growing diversification in the business model. Here's what investors need to know.
In fiscal 2024 (ended Sept. 28, 2024), Apple generated $391 billion in revenue, of which 75% came from the sale of products. This includes its popular iPhone, Mac, and iPad lineups.
But the company's services division is an up-and-coming money-maker, growing revenue 13% in the latest fiscal year, much faster than the overall business. It represents the other 25% of Apple's total sales.
Within services, Apple is making a bigger push into the financial services realm, where it appears to have developed a strong foothold.
In 2014, the company launched Apple Pay, its digital wallet solution that lets users connect credit and debit cards to use for transactions in-store and online. More than 90% of retailers in the U.S. accept Apple Pay, which has more than 600 million global users and handles trillions of dollars in payment volume. This is undoubtedly becoming a widely used checkout option.
Apple Card was launched in 2019. This is a credit card that gives consumers up to 3% cash back with no fees whatsoever. Apple partnered with Goldman Sachs to handle the program. The credit card portfolio has 12 million customers (data from early 2024) and $20 billion in balances.
It was reported that Visa offered the tech titan a cool $100 million to end its relationship with Mastercard, the current card network for Apple Card. American Express is also in the mix. What's more, issuers like JPMorgan Chase, Capital One, Synchrony Financial, and others are reaching out to Goldman Sachs, offering to take over the $20 billion in balances and to handle the program.
It makes sense why these heavyweights in the financial services industry would be trying so hard to be Apple's partner. Apple generates enormous amounts of revenue, and its customers are generally known to be more affluent than average. Consequently, there is a lot of buying power here, which can lead to revenue opportunities for banks and payment networks.
Apple might be facing some headaches due to tariffs and how they can affect its device sales. But its payment and credit card offerings continue to shine brightly. Partners are jockeying for position.
This gets to the discussion of whether or not Apple shares are a smart buy right now, especially since they are 26% below their record high. The price-to-earnings ratio is better than it was in December -- it's now at a 30.2 multiple.
However, I'm not convinced the tech stock can produce a return over the next five years that can outperform the broader market. Not only is the valuation still elevated, Apple's growth prospects aren't that robust. Plus, there is the unfortunate overhang of the tariff situation.
This is a fantastic business. But investors should pass on buying shares.
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American Express is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Synchrony Financial is an advertising partner of Motley Fool Money. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Goldman Sachs Group, JPMorgan Chase, Mastercard, and Visa. The Motley Fool has a disclosure policy.
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Consumers are trying to front-run tariffs, companies are in "wait-and-see" mode, and market volatility shows no sign of waning.
These are just some of the trends to emerge from JPMorgan Chase's first-quarter earnings call on Friday as analysts and investors clamored for insights into how Trump's tariff policies might be impacting the broader economy. The bank reported better-than-expected results for the three months ending March 31, but all eyes were on what bank execs might have gleaned about the economy since Trump's tariff policies went into effect on April 2.
CEO Jamie Dimon called upon the Trump administration to finish negotiating trade deals and get it done sooner rather than later. And when asked how the current economic and political situation compares to the past, Dimon said it remains to be seen.
"This is different. This is the global economy," he said in response to an analyst's question. "The most important thing to me is the Western world stays together economically, when we get through all this, and militarily, to keep the world safe and free for democracy. That is the most important thing."
Chief financial officer Jeremy Barnum described an economy that is still intact but bracing for trouble ahead. Consumers are still spending, but some of that is "front-loading spending" to get ahead of tariffs, Barnum said.
"Another thing that we are seeing, looking at the April data, would appear to be a little bit of front-loading of spending, specifically in items that might have prices go up as a function of tariffs," Barnum said.
The bank saw some weakened spending among lower-income consumers but "no evidence of distress." In fact, Barnum said, some of the increases in April spending were driven by lower-income consumers.
Barnum also said the bank has seen a dip in spending on travel but was reluctant to draw conclusions about whether this suggests a tightening of the purse strings.
"It's not obvious to us that that's necessarily an indicator for broader patterns," Barnum said. "There are a variety of potential explanations for the narrow drop in airline spend."
The bank boosted the amount it sets aside for credit losses by $973 million to $3.3 billion, citing a worse macroeconomic outlook.
Barnum said JPMorgan is not yet seeing a deterioration of lending quality, and loans are still being paid at the expected rate. Still, the bank is building reserves of $441 million for consumer lending and $549 million for wholesale lending to protect against people and companies not paying their loans.
Barnum said the firm has not seen "meaningful, observable draws" from clients, suggesting that client are not withdrawing their funds or using up their lines of credit to deal with losses.
He said some of the firm's large institutional clients have discussed shoring up liquidity, but the firm has not seen clients take out more loans to meet those liquidity needs. Loans tied to market activity have increased, however.
Both JPMorgan and its crosstown rival Morgan Stanley posted strong first-quarter revenues tied to their role executing trades for large investors, a trend that's only expected to have accelerated since Trump's tariffs sent markets spinning on April 2.
"I think this just happened to be very favorable conditions that we've managed very successfully," said Barnum.
Barnum said that market conditions are causing them to adopt "a cautious stance" on the investment banking outlook and are seeing a "wait-and-see" attitude from corporate clients.
"I think we would characterize what we're hearing from our corporate clients as a little bit of a wait-and-see attitude," Barnum said. "I do think you see obvious differences across sectors. Some sectors are going to be much more exposed than others and have more complicated problems to solve."
Health experts took to one of the country's leading medical journals to pen searing rebukes of Robert F. Kennedy Jr.'s first weeks as the country's top health official—and they called upon their colleagues to rise up to fight the misinformation and distrust they allege Kennedy, a long-time anti-vaccine advocate, is fomenting.
From gutting federal health agencies and knee-capping critical local public health programs, to delaying a significant vaccine advisory meeting, hiring a discredited anti-vaccine advocate to conduct a vaccine study, ousting the country's top vaccine regulator, and undermining the response to the mushrooming measles outbreak in Texas that stands to threaten the country's measles elimination status—the researchers had no shortage of complaints.
In one article, pediatric infectious disease expert Kathryn Edwards of Vanderbilt University recounted the timeline of the measles outbreak, noting the missteps, missed opportunities, and controversial comments Kennedy made along the way. The rundown included his trivialization of the outbreak, failure to strongly advocate for vaccination, promotion of unproven treatments, like cod liver oil, and delayed responses from the Centers for Disease Control and Prevention, which Kennedy controls.
© Getty | Jim Watson
On Saturday, Meta released its newest Llama 4 multimodal AI models in a surprise weekend move that caught some AI experts off guard. The announcement touted Llama 4 Scout and Llama 4 Maverick as major advancements, with Meta claiming top performance in their categories and an enormous 10 million token context window for Scout. But so far the open-weights models have received an initial mixed-to-negative reception from the AI community, highlighting a familiar tension between AI marketing and user experience.
"The vibes around llama 4 so far are decidedly mid," independent AI researcher Simon Willison told Ars Technica. Willison often checks the community pulse around open source and open weights AI releases in particular.
While Meta positions Llama 4 in competition with closed-model giants like OpenAI and Google, the company continues to use the term "open source" despite licensing restrictions that prevent truly open use. As we have noted in the past with previous Llama releases, "open weights" more accurately describes Meta's approach. Those who sign in and accept the license terms can download the two smaller Llama 4 models from Hugging Face or llama.com.
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