Jefferies downgrades Apple stock to Underperform on iPhone 18 concerns

Jefferies downgraded Apple (AAPL) from Hold to Underperform, setting a new price target of $205.16, despite raising iPhone unit growth forecasts for FY2025-2027. The firm attributes the downgrade to the current $257.13 stock price, which it believes reflects "excessive expectations" for the iPhone 18 Fold, implying sales more than double Jefferies' projections. This cautious stance, also noting anticipated price increases for future Pro models, contrasts with Evercore ISI and CLSA maintaining Outperform ratings, while UBS holds a Neutral view, highlighting diverse analyst sentiment amid slowing App Store revenue growth and a pending anti-competitive lawsuit.

Analysis

Apple Inc. (AAPL) faces a notable shift in sentiment following a downgrade from Jefferies to Underperform, with a price target of $205.16, in stark contrast to its current trading price of $257.13 near its 52-week high. The downgrade's rationale is centered on valuation, as Jefferies contends the stock price reflects "excessive expectations" for the unannounced iPhone 18 Fold, implying sales volumes more than double the firm's 12.5 million unit forecast. This cautious stance persists despite Jefferies simultaneously raising its iPhone unit growth forecasts for FY2025 to 7%. Further headwinds are emerging, including a deceleration in App Store revenue growth, which slowed from 14% year-over-year in August to 7% in September, and a pending anti-competitive lawsuit from xAI. The analyst community remains divided; while Jefferies and UBS (Neutral, $220 PT) signal caution, Evercore ISI and CLSA maintain Outperform ratings with significantly higher price targets of $290 and $265, respectively, banking on a future product upgrade cycle. This divergence highlights a critical debate over whether Apple's future growth, particularly from new product categories and pricing power, is already fully priced into its $3.82 trillion market capitalization.

Key Decisions for Investors

• Given the stock is trading near its 52-week high against a backdrop of an analyst downgrade citing excessive valuation, investors should scrutinize their position size and consider the significant downside risk implied by the $205.16 price target.
• Monitor future guidance and sales data related to the iPhone 18 Fold and App Store revenue growth, as these are the primary points of contention driving the current divergence in analyst ratings and will likely be key catalysts for the stock.
• The wide dispersion in analyst price targets, from $205 to $290, signals heightened uncertainty and potential for increased volatility, warranting a cautious approach until a clearer consensus on the next growth cycle emerges.