Apple Shares Fall on Downgrades
Investors sold off Apple (AAPL) shares on Tuesday after Jefferies downgraded the stock to an “underperform” rating, citing concerns about declining iPhone sales and weak demand for the company's artificial intelligence (AI) features.
The downgrade comes as Apple prepares to report its first-quarter 2025 earnings on Thursday, January 30. Jefferies analysts anticipate the tech giant will miss its revenue guidance of 5% growth due to sluggish iPhone sales and reduced expectations for the iPhone 17/18 models.
Lackluster iPhone Sales and AI Demand
Jefferies analysts pointed to weakening iPhone sales and a muted response to Apple's AI features as key factors behind their downgrade. They noted that the company's iPhone 17/18 models have not generated the expected level of interest, particularly regarding the integration of AI capabilities.
Apple's AI features, which include Siri, Face ID, and other advanced functions, have not yet gained widespread adoption among consumers. This has led to concerns that Apple may be falling behind competitors in the AI space, which could impact future growth prospects.
JPMorgan's Cautious Outlook
JPMorgan analysts also expressed caution about Apple's outlook, downgrading their price target on the stock to $260 from $265. They cited similar concerns about the company's iPhone sales and weak China demand, as well as the impact of a strong dollar.
JPMorgan analysts believe Apple is losing market share in China, particularly in the mid-to-low-tier smartphone segment. This is due to the lack of local government subsidies for Apple's premium phones, making them less competitive against rivals.
China Market Challenges
Apple's struggles in China are a significant concern, as the country represents a major growth market for the company. The tech giant recently lost its position as China's largest smartphone seller, highlighting the challenges it faces in the region.
The absence of Apple's AI features on its China iPhones further exacerbates the situation, making it difficult for the company to differentiate its products from competitors.
Investor Reaction
Investors reacted negatively to the downgrades, sending Apple shares down by around 3.5% on Tuesday. The stock has lost nearly 12% so far in 2025, reflecting concerns about the company's growth prospects.
Apple's earnings report on Thursday will be closely watched by investors and analysts, as it will provide more insight into the company's current performance and future outlook.