Apple Stock Cut to Equivalent of Sell. Why This Analyst Threw in the Towel.

Jefferies analysts downgraded Apple stock to Underperform from Hold and trimmed their price target to $205.16 from $205.82. (Getty Images)

Key Points

• Jefferies downgrades Apple stock to Underperform from Hold, citing unrealistic expectations for future iPhone models.
• The firm lowers Apple’s price target to $205.16 from $205.82.
• Analysts believe high expectations for the foldable iPhone and iPhone 17 demand are already priced into the stock.

Apple stock was downgraded on Friday as analysts at Jefferies sounded the alarm over unrealistic expectations for upcoming iPhone models as well as the upgrade cycle.

Jefferies cut its rating on shares of the iPhone maker to Underperform from Hold on Friday. The firm also lowered its price target to $205.16 from $205.82.

Apple shares gained 0.4% to $258.02, reversing earlier losses. The S&P 500 and Nasdaq Composite were up 0.3% and 0.2%, respectively.

In the firm’s view, expectations for the forthcoming foldable iPhone are too high. Better demand for the iPhone 17, which Jefferies partly attributes to a price cut on the base model rather than new innovations, already is priced into the stock, the firm argued. “That has led to excessive expectations on 18 Fold, and the replacement cycle,” analysts wrote.

Jefferies believes Apple’s current valuation prices in an “overly bullish iPhone outlook.” After raising iPhone forecasts and including a $100
price hike for the future iPhone 18, the firm’s discounted cash flow value “remains little changed.”

Without new features that push the envelope, a price-driven replacement cycle may not be sustainable and could result in margin pressure, analysts posited. One notable change within the 17 series is the brand-new iPhone Air, which has been touted as the thinnest iPhone yet. However, this design hasn’t resonated with consumers, “making any bullish view on foldable risky,” Jefferies argued.

That’s not to mention competition in the market. The most important component of the foldable phone—the display—takes a page out of Samsung’s book. The recently launched Samsung Galaxy Z Fold 7 retails for around $2,000, and Jefferies believes “it is the price point that limits the total addressable market, not the form factor.”

Seaport Research Partners was more optimistic on Apple stock. The firm initiated coverage on Apple shares earlier this week with a Buy rating and $310 price target, suggesting 20% upside to Friday’s price. While device sales have been flat to down over the past three years, Apple has gotten better at monetizing its user base, analyst Jay Goldberg wrote.

Opinions on Wall Street have been divided, though most analysts are bullish on the stock. Of 50 firms tracked by FactSet, 31 rate Apple stock at Buy or the equivalent. Seventeen rate it at Hold, and two—including Jefferies—at Sell.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com