Jefferies analyst Edison Lee downgraded the investment bank’s rating on Apple’s (AAPL) stock to Underperform and decreased his price goal on Apple stock by 13% to $200.75 on Monday. Loop Capital also downgraded Apple’s stock from Buy to Hold, with a revised price goal of $230, down from $275.
In an investor note, Lee said he expects Apple to report lower than expected results for its December quarter and a miss on expectations for the second quarter on weak iPhone sales and a scarcity of interest in AI amongst consumers.
Shares of Apple fell as much as 3.7% midday on Tuesday. The stock is up 16% during the last 12 months. Big Tech rivals Meta (META) and Alphabet (GOOG, GOOGL) are up some 36% and 30%, respectively, during the last 12 months, while Microsoft (MSFT) is up just 3.5%. The broader S&P 500 has climbed 20% in the identical period.
In response to Lee, iPhone sales in China fell between 15% and 20% year-over-year. Apple is contending with numerous headwinds within the region including the continued ascendence of local offerings from Huawei and Xiaomi and cautious consumer spending amidst a slower economic backdrop.
Apple isn’t just coping with trouble in China. Overall iPhone market share fell roughly 1% year-over-year in Q4 to 23%, based on estimates by Canalys and IDC. That’s despite the proven fact that smartphone shipments rose 3%, Canalys reports.
Jefferies forecasts that iPhone revenue will decline 0.4% year-over-year for the primary quarter, while total Apple sales will grow 2.8%, lower than the firm’s prior estimate of 4.6%.
A part of Apple’s issue, Lee contends, is that the corporate’s big push into AI isn’t panning out as investors had hoped. Apple Intelligence, Apple’s artificial intelligence platform for the iPhone, iPad, and Mac was expected to kick off a sales super cycle. But when IDC and Canalys estimates prove correct, it’ll throw cold water on the AI sales boost.
Apple began rolling out Apple Intelligence in batches in October. It’s a dangerous move for Apple, which generally debuts its latest and best services and products at one time via big, splashy launch events. That makes it difficult for patrons to know when the platform will feature all the capabilities Apple initially promised when it debuted Apple Intelligence in June 2024.
AI smartphones, and their counterpart AI PCs, are struggling to achieve traction despite an enormous sales push from tech giants starting from Apple and Google to Microsoft and Intel.
Apple’s iPhone is its most significant product, and China is amongst its most significant sales regions. In 2024, the iPhone accounted for $201.1 billion of Apple’s $391 billion in total revenue. The corporate’s second largest business segment, its Services division, brought in $96.1 billion.
