Shares of Apple (NASDAQ: AAPL) fell 4.1% as of 12:30 PM ET on Tuesday.
Apple was downgraded by not one but two Wall Street sales analysts as preliminary numbers for the December quarter point to disappointing iPhone sales.
Today analysts say so Jefferies and Loop Capital each lowered their ratings on Apple.
Jefferies analyst Edison Lee downgraded Apple to underperform from hold and lowered his price target to $200.75 from $211.84. Based on data from International Data Corporation (IDC), Lee recalibrated iPhone shipment figures from a 1% growth to a 2% decline in the December quarter. But even that may be optimistic, as IDC data points to a potential 4% drop in iPhone shipments.
The main source of weakness is, unsurprisingly, China, where independent research points to an 18.2% decline in iPhone sales. Chinese consumers are currently in something of a recession and low-priced domestic rivals appear to be taking over their market share.
Lee also noted that consumers don't seem to see a big benefit from Apple Intelligence yet. As such, the expected AI-driven upgrade cycle may not materialize as some believe.
Loop also downgraded Apple from buy to hold today, citing weak current trends and the possibility of a poor outlook for the March quarter. Loop remains slightly more optimistic than Jefferies, as the company still expects “material strengthening” in demand in the June and September quarters later this year. Loop still believes in Apple's long-term “structural” growth as a beneficiary of AI, but the timing seems delayed.
At more than 36 times earnings, Apple seems expensive for a company that is only growing in single digits. Apple also has complications with China from a demand perspective and the fact that it produces iPhones there. Moreover, it is an open question whether Apple can apply AI.
Apple still has a huge, steady customer base, so it doesn't seem like there's any serious danger. But its appreciation at this level leaves little room for disappointment.
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