Investing.com — Jefferies analysts downgraded Apple stock to Underperform from Hold on Monday as they expect the tech giant to miss both earnings and guidance targets in its upcoming fiscal Q1 2025 report. The company’s shares fell around 1% in premarket trading Tuesday.
Jefferies’ price target on Apple Inc (NASDAQ:AAPL) stock was also reduced to $200.75 from $211.84, implying a 13% downside from the last closing price.
The bearish expectations come amid weak iPhone sales and a subdued outlook for iPhone 17 and 18 due to “slower AI uptake and commercialization,” analysts said in a note.
They project Apple to fall short of its revenue growth guidance of 5% for the first quarter and to guide to only low single-digit revenue growth in the second quarter, also below consensus.
Jefferies has reduced their forecast for iPhone shipments from a 1% growth to a 2% decline for the first quarter of fiscal year 2025, based on data indicating a roughly 4% year-over-year decrease in iPhone shipments during this period, according to the International Data Corporation (IDC).
The sell-through of iPhones in China during the same quarter is reported to have dropped significantly, while international markets might see marginal growth. Furthermore, the outlook for other Apple products such as iPads and MacBooks is bleak due to the overall weakness in the consumer electronics market.
The downgrade of Apple stock also reflects concerns over the March quarter guidance, which analysts believe could disappoint investors. Despite optimism about demand in China due to government subsidies, new policies will limit these subsidies, effectively excluding most iPhone models.
“We also believe demand for SE4 may be weaker than expected, since it will likely compete not so much with Android or iPhone 14/15, but used iPhone 13/14 P/PM,” analysts led by Edison Lee noted.
“We do not think consumers would be attracted to SE4 owing to Apple Intelligence, especially in China,” they added.
Moreover, Jefferies’ team suggests that the near-term outlook for AI in smartphones is subdued, as a third-party survey indicates that US consumers do not find smartphone AI particularly useful.
Industry checks also raise the possibility of delays in Apple’s advanced packaging roadmap, which is crucial for enhancing AI capabilities on the iPhone. This uncertainty is attributed to slower AI monetization, which could dampen expectations for a significant upgrade cycle driven by AI.
“Even if iPhone has new form factors in the next 2 years, volume growth will likely be slower if AI takes longer to materialize,” analysts explained.
In light of these factors, they have cut its earnings per share (EPS) forecasts for Apple by 2% to 23% over the next three years, with fiscal year 2025 (FY25) and FY26 EPS estimates now approximately 4% below consensus.