Apple Stock Downgraded: Growth Concerns Persist

Apple Inc. (NASDAQ:AAPL) stock faced a double downgrade this week, with analysts at Loop Capital and Jefferies expressing concerns over the tech giant's growth prospects. The downgrades sent Apple shares sliding more than 2% in premarket trading on Tuesday, as investors grapple with the potential challenges ahead.

Loop Capital analyst Ananda Baruah downgraded Apple stock to Hold from Buy, citing expectations of "material iPhone demand reduction" starting in the March quarter but "materially amplifying" in the June and September quarters. Baruah added, "As such, while the foundation of our 7/15/24 structural Buy call could still materialize, it now remains unclear on timing, and it certainly won’t be for the next nine months given we’re on the front end of 2.5 quarters of materially softening iPhone demand."

Jefferies analysts, led by Edison Lee, slashed their Apple stock rating to Underperform from Hold, projecting that the tech giant would miss both earnings and guidance targets in its upcoming fiscal Q1 2025 report. The firm's price target on Apple stock was also reduced to $200.75 from $211.84, implying a 13% downside from the last closing price. Lee noted that Apple was expected 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 downgrades reflect concerns over Apple's ability to maintain its growth momentum, particularly in the face of intense competition in the China market and a potential slowdown in AI-driven smartphone demand. As Apple approaches its earnings report on January 30, investors will be closely watching for signs of revenue weakness highlighted in the Jefferies report.

Despite the downgrades, Apple's consensus price target stands at $245.17, based on 30 analyst ratings, with recent analysis from MoffettNathanson, Bernstein, and B of A Securities suggesting a modest 2.25% upside potential. However, the contrasting narratives between the bearish expectations of these analysts and the broader Wall Street sentiment underscore the importance of closely monitoring Apple's performance and considering multiple perspectives when making investment decisions.

In conclusion, the recent downgrades of Apple's stock by Loop Capital and Jefferies highlight the concerns over the tech giant's growth prospects, particularly in the face of intense competition in the China market and a potential slowdown in AI-driven smartphone demand. As Apple approaches its earnings report, investors will be closely watching for signs of revenue weakness and potential strategic moves to address these challenges.