Jefferies analyst Edison Lee lowered the investment bank’s rating on Apple (AAPL) underperformed and lowered its price target by 13% to $200.75 on Monday. Loop Capital also lowered its rating on Apple shares from Buy to Hold, with a revised price target of $230, from $275.
In a note to investors, Lee said he expects Apple to report lower-than-expected results for its December quarter and lower-than-expected second-quarter results due to weak Apple sales. iPhone and the lack of consumer interest in AI.
Apple shares fell 3.7% as of midday Tuesday. The stock is up 16% over the last 12 months. Big Tech Competes with Meta (META) and the alphabet (GOOG, GOOGLE) are up 36% and 30% respectively over the past year, while Microsoft (MSFT) is up just 3.5%. The broader S&P 500 index has climbed 20% over the same period.
According to Lee, iPhone sales in China fell between 15% and 20% year over year. Apple faces a number of headwinds in the region, including the continued rise of local offerings from Huawei and Xiaomi and cautious consumer spending amid a slower economy.
Apple isn’t just facing problems in China. The iPhone’s overall market share fell about 1% year-over-year in the fourth quarter, to 23%, according to estimates from Canalys and IDC. This is despite the fact that smartphone shipments increased by 3%, Canalys reports.
Jefferies forecasts that iPhone revenue will decline 0.4% year over year in the first quarter, while Apple’s total sales will increase 2.8%, less than the company’s previous estimate of 4 .6%.
Part of Apple’s problem, Lee says, is that the company’s massive AI efforts aren’t playing out the way investors had hoped. Apple Intelligence, Apple’s artificial intelligence platform for iPhone, iPad and Mac, was expected to launch a sales supercycle. But if the IDC and Canalys estimates prove correct, it would put a damper on the growth in AI sales.
Apple began rolling out Apple Intelligence in batches in October. It’s a risky move for Apple, which typically launches its latest and greatest products and services at the same time via big, spectacular launch events. This makes it difficult for customers to know when the platform will deliver all the features Apple initially promised when Apple Intelligence launched in June 2024.
AI smartphones and their AI PC counterparts are struggling to gain traction despite a massive sales push from tech giants ranging from Apple and Google to Microsoft and Intel.
Apple’s iPhone is its most important product, and China is among its main sales regions. In 2024the iPhone accounted for $201.1 billion of Apple’s $391 billion in total revenue. The company’s second-largest business segment, its Services division, brought in $96.1 billion.