Apple stock slides after two ratings downgrades

Investing.com -- Wall Street analysts downgraded Apple banal this week, sending its shares sliding much than 2% successful premarket trading Tuesday.

Analysts astatine Jefferies slashed their Apple Inc (NASDAQ:) banal standing to Underperform from Hold connected Monday arsenic they expect the tech elephantine to miss some net and guidance targets successful its upcoming fiscal Q1 2025 report. 

The firm's terms people connected the tech giant's shares was besides reduced to $200.75 from $211.84, implying a 13% downside from the past closing price. 

The bearish expectations travel amid anemic iPhone income and a subdued outlook for iPhone 17 and 18 owed to “slower AI uptake and commercialization,” analysts said successful a note.

They task Apple to autumn abbreviated of its gross maturation guidance of 5% for the archetypal 4th and to usher to lone debased single-digit gross maturation successful the 2nd quarter, besides beneath consensus.

Jefferies has reduced their forecast for iPhone shipments from a 1% maturation to a 2% diminution for the archetypal 4th of fiscal twelvemonth 2025, based connected information indicating a astir 4% year-over-year alteration successful iPhone shipments during this period, according to the International Data Corporation (IDC).

The sell-through of iPhones successful China during the aforesaid 4th is reported to person dropped significantly, portion planetary markets mightiness spot marginal growth. Furthermore, the outlook for different Apple products specified arsenic iPads and MacBooks is bleak owed to the wide weakness successful the user electronics market.

The downgrade of Apple banal besides reflects concerns implicit the March 4th guidance, which analysts judge could disappoint investors. Despite optimism astir request successful China owed to authorities subsidies, caller policies volition bounds these subsidies, efficaciously excluding astir iPhone models.

“We besides judge request for SE4 whitethorn beryllium weaker than expected, since it volition apt vie not truthful overmuch with Android oregon iPhone 14/15, but utilized iPhone 13/14 P/PM,” analysts led by Edison Lee noted.

“We bash not deliberation consumers would beryllium attracted to SE4 owing to Apple Intelligence, particularly successful China,” they added.

Moreover, Jefferies’ squad suggests that the near-term outlook for AI successful smartphones is subdued, arsenic a third-party survey indicates that US consumers bash not find smartphone AI peculiarly useful.

Industry checks besides rise the anticipation of delays successful Apple's precocious packaging roadmap, which is important for enhancing AI capabilities connected the iPhone. This uncertainty is attributed to slower AI monetization, which could dampen expectations for a important upgrade rhythm driven by AI.

“Even if iPhone has caller signifier factors successful the adjacent 2 years, measurement maturation volition apt beryllium slower if AI takes longer to materialize,” analysts explained.

In airy of these factors, they person chopped its net per stock (EPS) forecasts for Apple by 2% to 23% implicit the adjacent 3 years, with fiscal twelvemonth 2025 (FY25) and FY26 EPS estimates present astir 4% beneath consensus.

Separately, Loop Capital analysts besides chopped their standing connected Apple banal to Hold from Buy, citing expectations of "material iPhone request reduction" starting successful the March 4th but "materially amplifying" successful the June and September quarters. 

"As such, portion the instauration of our 7/15/24 structural Buy telephone could inactive materialize, it present remains unclear connected timing, and it surely won’t beryllium for the adjacent 9 months fixed we’re connected the beforehand extremity of 2.5 quarters of materially softening iPhone demand," Loop analyst Ananda Baruah added.