Apple stock falls after KeyBanc downgrade on slowing growth concerns

Apple AAPL stock fell around 1% on Tuesday after KeyBanc Capital Markets downgraded the iPhone maker, citing slowing hardware demand, weaker growth expectations, and valuation concerns despite the stock's strong performance over the past year.

Shares declined about 1.7% to $311.91 on Tuesday after analyst Brandon Nispel cut his rating on the stock to Underweight from Sector Weight.

He also assigned a $250 price target, implying roughly 21% downside from Monday's closing price.

The downgrade comes as Wall Street remains broadly positive on Apple, with several analysts maintaining bullish ratings and higher price targets.

The stock recovered some of the losses and was trading down 0.46% at the time of writing.

KeyBanc cites slowing hardware demand and rich valuation

In a research note, Nispel said KeyBanc's spending checks pointed to "another month of below-trend growth" for Apple in June, adding that growth was beginning to fade after receiving a boost in 2025.

The analyst highlighted sluggish iPhone sales, weaker demand for Macs and iPads, and the potential impact those trends could have on Apple's higher-margin services business, including iCloud and Apple Music.

Nispel also argued that the company's valuation leaves little room for disappointment.

He wrote that the combination of slowing hardware demand and softer services growth would make the stock appear "too expensive."

Apple currently trades at about 36 times expected fiscal 2026 earnings, above both its five-year historical average and the broader S&P 500.

According to Nispel's analysis, June indexed hardware spending fell 2% month over month, compared with a three-year average growth rate of 9%, suggesting US demand has normalized following last year's tariff-driven surge.

He also expects slower iPhone production, weaker upgrade activity in the United States, and reduced device subsidies to weigh on future growth.

In his view, consensus forecasts for iPhone, Mac, iPad, Wearables and Services through 2027 are too optimistic and could require downward revisions.

Apple still has support from Wall Street bulls

Despite the downgrade, Apple continues to enjoy broad support from analysts.

The stock has gained 1.4% over the past week, 6.4% over the past month and 51% over the past year.

Wall Street currently maintains a Moderate Buy consensus, with an average 12-month price target of $327.20.

Morgan Stanley analyst Erik Woodring reiterated his Buy rating and maintained a $360 price target.

Woodring said Apple's pricing power remains a key advantage, arguing that demand for major products remains resilient even as prices increase.

He said, "demand for key devices such as the iPhone, Mac, and iPad is relatively insensitive to price changes, allowing Apple to raise prices without materially weakening unit demand, while also protecting margins as component costs rise."

He also expects higher iPhone pricing and new AI-focused products to support earnings growth over the coming years.

Price increases and future growth remain in focus

Apple announced in late June that it would increase prices for MacBooks and iPads as memory component costs continue to rise.

Woodring believes upcoming iPhone price increases, combined with Apple's product roadmap featuring new form factors and AI-enhanced user experiences, could lift both near-term and fiscal 2027 earnings per share.

Evercore ISI analyst Amit Daryanani also maintained a Buy rating on Apple and set a $365 price target.