Wall Street analyst downgrades Apple stock — Here's why

Apple Stock Downgrade and Market Performance - Apple received a rare Wall Street downgrade from Jefferies analyst Edison Lee, who shifted the rating to 'Underperform' from 'Hold' and lowered the price target to $200.75, reflecting a potential 12% drop from the current valuation [1][3] - The stock has declined nearly 9% year-to-date, with further weakness observed ahead of the market opening on January 21, dropping over 1% to $227.99 [2] - The downgrade is driven by Apple's expensive valuation at 32x FY25 estimated earnings and a 15% premium to its long-term discounted cash flow estimates, alongside overly optimistic revenue forecasts [4] Challenges in AI-Driven Smartphone Features - Consumer enthusiasm for AI-driven smartphone features, including Apple Intelligence, remains muted, with potential delays in Apple's advanced packaging roadmap for the iPhone exacerbating the outlook [5] - The limited traction of AI-enabled iPhones in key markets like China, due to the unavailability of key features, has hindered adoption [9] iPhone Sales and Market Competition - iPhone sales in China, a critical market, plummeted 18.2% year-over-year during the December quarter, dropping Apple to third place in the market [8] - Apple faces growing competition from local brands like Huawei, which reclaimed the top spot in China with a 15.5% surge in sales driven by its Mate 70 series and mid-range Nova 13 lineup [9] - Globally, iPhone sales fell 5% during the same period, with supply chain analyst Ming-Chi Kuo forecasting a possible 6% YoY drop in iPhone shipments for H1 2025 [9][10] Analyst Sentiment and Diverging Views - The Jefferies downgrade aligns with Moffett Nathanson's 'Sell' rating, citing Apple's "decidedly unattractive" outlook due to valuation concerns and lukewarm reception of its latest devices [10] - Despite challenges, Evercore ISI maintains a 'Tactical Outperform' rating on Apple shares with a $250 price target, highlighting divergent views on Wall Street [11] Bullish Outlook and Growth Potential - Wedbush's Dan Ives predicts a "golden era of growth" for Apple, driven by AI advancements and a multi-year iPhone upgrade cycle, with sales potentially topping 240 million units in FY 2025 [12] - Bernstein's Toni Sacconaghi raised Apple's price target from $240 to $260, citing strong fundamentals, disciplined capital returns, and double-digit earnings growth, though cautioning about high valuation and seasonal trading patterns [13]