Apple's (AAPL) gross margin is facing pressure due to tariffs, with existing guidance of $900 million in tariff-related costs in fiscal Q3 and about $1 billion expected in the September quarter, BofA Securities said in an earnings preview on Monday.
"While tariffs can be a headwind to gross margin again in fiscal Q4, we model that quarter as the trough and subsequent gross margin improvement driven by a better mix of higher average selling price products, including the slim iPhone 'Air,' which we expect Apple to launch this fall," BofA said.
The slim iPhone, priced $100 above the current Plus model, is expected to drive higher replacement rates while refreshed MacBook Airs and iPad Pros will improve sales, according to the firm.
BofA expects Apple to report in-line results for the June quarter and slightly beat the revenue outlook for the September quarter, backed by better iPhone momentum in China and services strength.
BofA reiterated its buy rating and a $235 price target.
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