Apple Downgraded Amid Soft iPhone Sales Concerns
Shares of Apple Inc. faced a double downgrade from analysts, reflecting growing worries among investors about decelerating iPhone sales and the limited impact of artificial intelligence as a catalyst for growth.
Following the downgrades, Apple's consensus recommendation rating dropped to 4.02 out of 5, its lowest level since May. The stock's one-month decline of 11% positions it for its steepest monthly loss since December 2022.
Loop Capital downgraded the stock to hold, while Jefferies initiated an underperform rating, becoming one of the few firms with an equivalent to a sell rating. Jefferies analyst Edison Lee cited worse-than-expected iPhone sales weakness, particularly in the crucial China market.
Lee's research indicated an 18.2% decline in iPhone sales in China during the December quarter and a 5% drop in global unit sales within the final quarter of 2023. Independent research also revealed that "US consumers do not yet find smartphone AI useful," diminishing the likelihood of a significant upgrade cycle.
Loop Capital predicts a "material iPhone demand reduction" starting in March, which is expected to intensify in the subsequent quarters. While the firm's prior buy rating drivers may still manifest, analyst Ananda Baruah notes that "it certainly won't be for the next nine months" given the current market conditions.
Apple's first-quarter results are due next week. Amidst the downgrades, the company's recommendation consensus now falls within the lowest 20% of coverage compared to other megacap tech stocks.
MoffettNathanson had previously downgraded the stock due to China concerns and valuation issues. Morgan Stanley recently replaced Apple with Seagate Technology as its top pick for IT hardware.