AAPL stock: Apple gets another rating downgrade as analyst sees 13% downside

Jefferies has issued a stark warning for Apple investors, downgrading the stock to "underperform" from "hold" and lowering its price target to $200.75 from $211.84, as per a CNBC report.

This new target implies a potential downside of 13% from Apple's current market price. Jefferies analyst Edison Lee expressed concerns over Apple's revenue trajectory and its positioning in artificial intelligence (AI), leading to the bearish call.

Apple's bearish outlook

Lee projects that Apple will miss its first-quarter fiscal 2025 revenue growth forecast of 5% and expects the company to issue second-quarter guidance reflecting growth in the low single digits—below consensus estimates.

With Apple set to report earnings on January 30, the potential revenue shortfall raises questions about the tech giant’s near-term performance.

Jefferies highlighted Apple's "subdued" approach to artificial intelligence as a concern, noting that investor interest has largely been directed toward the potential of AI technology over the past year.

Alongside muted AI developments, Lee cited disappointing iPhone sales as another factor likely contributing to weak revenue performance.

The analysts also expressed concerns about Apple's performance in China, attributing potential weakness to a "consumption downgrade trend" where Chinese consumers increasingly prefer cheaper Android models over Apple's premium-priced iPhones.

The situation is compounded by new Chinese policies limiting smartphone subsidies to devices priced below $820.

This restriction excludes most iPhone models, which could significantly impact sales in a region critical to Apple's growth.

The anticipated launch of a lower-end iPhone SE model, potentially featuring Apple Intelligence AI software, may also underperform expectations, according to Lee.

He noted that the phone's single-camera setup could limit its appeal, positioning it to compete more with older iPhone models than with newer Android or Apple devices.

Wall Street analysts on Apple

Despite the downgrade, Jefferies’ stance contrasts sharply with broader Wall Street sentiment.

According to Tipranks.com, 19 analysts currently rate Apple as a "buy," six as a "hold," and only three other analysts recommend selling the stock.

However, the downgrade follows another one from earlier this month.

MoffettNathanson analyst Craig Moffett issued a bearish outlook on Apple, downgrading the stock from "hold" to "sell" and lowering the price target from $202 to $188.

The revised target indicates an around 18% downside from the stock's current market price of around $230.

Moffett noted that when the firm initiated coverage in August, Apple’s valuation already reflected its potential success in artificial intelligence.

However, he highlighted risks such as weakening prospects in China and unrealistic expectations for a sustained increase in iPhone upgrade rates.

The analyst’s outlook has grown more cautious due to what he describes as a "lukewarm" consumer response to Apple’s AI features, further dampening his optimism about the stock.

Investors will closely watch the January 30 earnings release for further clarity on Apple's growth outlook and strategic direction.