Investing.com – Wall Street analysts downgraded Apple stock this week, sending its shares down more than 2% in premarket trading on Tuesday.
Analysts at Jefferies on Monday downgraded their Apple Inc (NASDAQ 🙂) shares to Underperform from Hold as they expect the tech giant to miss earnings and guidance targets in its upcoming fiscal first-quarter 2025 report. .
The company’s price target for the tech giant’s shares was also lowered to $200.75 from $211.84, implying a 13% drop from the last closing price.
The bearish expectations come amid weak iPhone sales and a subdued outlook for the iPhone 17 and 18 due to “slower adoption and commercialization of AI,” the analysts said in a note.
They project that Apple will miss its 5% revenue growth target for the first quarter and will aim for low-single-digit revenue growth in the second quarter, also below consensus.
Jefferies has lowered its forecast for iPhone shipments from 1% growth to a 2% decline for the first quarter of fiscal 2025, based on data indicating a roughly 4% year-over-year decline in iPhone shipments during this period, according to the International Data Corporation (IDC).
Direct sales of iPhones in China during the same quarter reportedly fell significantly, while international markets could see marginal growth. Additionally, the outlook for other Apple products, such as iPads and MacBooks, is bleak due to overall weakness in the consumer electronics market.
Apple’s stock downgrade also reflects concerns about its March quarter guidance, which analysts believe could disappoint investors. Despite optimism about demand in China due to government subsidies, the new policies will limit these subsidies, effectively excluding most iPhone models.
“We also believe that demand for the SE4 may be weaker than expected, as it will likely compete not so much with Android or iPhone 14/15, but with the used iPhone 13/14 P/PM,” noted analysts led by Edison Lee .
“We don’t think consumers will be attracted to the SE4 because of Apple Intelligence, especially in China,” they added.
Additionally, the Jefferies team suggests that the near-term outlook for AI in smartphones is moderate, as a third-party survey indicates that US consumers do not find AI in smartphones particularly useful.
The industry checks also raise the possibility of delays to Apple’s advanced packaging roadmap, which is crucial to improving AI capabilities in the iPhone. This uncertainty is attributed to slower AI monetization, which could dampen expectations of a significant AI-driven upgrade cycle.
“Even if the iPhone has new form factors in the next two years, volume growth will likely be slower if AI takes longer to materialize,” the analysts explained.
In light of these factors, they have reduced their earnings per share (EPS) forecasts for Apple by between 2% and 23% over the next three years, with EPS estimates for fiscal year 2025 (FY25) and FY26 now approximately 4% below consensus.
Separately, analysts at Loop Capital also lowered their rating on Apple stock to Hold from Buy, citing expectations of a “material reduction in iPhone demand” starting in the March quarter, but “amplifying materially” in the future. June and September quarters.
“As such, while the basis of our 7/15/24 structural buy call could still materialize, the timing is unclear now, and certainly won’t be for the next nine months, given that we are on the front end of “2.5 quarters of materially weakening iPhone demand,” added Loop analyst Ananda Baruah.