Apple Stock Gets an Upgrade. That Doesn’t Mean It’s Time to Buy.

People wait outside the entrance to the new Apple retail store (Chris McGrath/Getty Images)

Apple stock got a rare upgrade from a Wall Street analyst, pointing to a potential positive surprise for its June quarter. However, investors might want to wait before rushing into the stock.

Apple hasn’t been a favorite recently among investors or analysts amid doubts about its artificial-intelligence strategy. But Jefferies analyst Edison Lee upgraded the stock to Hold from Underperform in a research note on Tuesday, citing the potential for its next earnings report to beat expectations.

The shares were up 2.6% at $213.17 in early trading.

The key is in China, where Lee estimates that iPhone sales grew around 10% in the first couple of months of the June quarter, driven by targeted discounts. That helps drive his forecast for Apple to deliver 8% revenue growth for the quarter overall, beating the company’s guidance for low-single-digit percentage growth.

But Lee doesn’t see the cheer lasting long. The strength of sales in the June quarter could lead to lower demand in the following September quarter, where the analyst expects a 6% decline in iPhone shipments from the same period in the previous year.

“Sales could be at risk since there remains a lack of new features, and AI is not yet a game changer,” Lee wrote. “The market’s benign view on tariffs is likely overly optimistic.”

The analyst calculates Apple could suffer a 7% hit to earnings per share this fiscal year and next fiscal year under a scenario where the U.S. imposes a 10% tariff on India, a 20% tariff on Vietnam and a 30% tariff on China, the company’s main manufacturing bases for the iPhone and other devices.

India is currently facing a potential 26% tariff on imports to the U.S., while levies on Chinese goods have been temporarily slashed to 30%. However, those levels are subject to change as the Trump administration negotiates with its counterparts.

Lee’s new price target of $188.32, up from $170.62 previously, still implies Apple stock is set to fall from here.

Write to Adam Clark at adam.clark@barrons.com