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Technology titan Apple (NASDAQ: AAPL) has received a rare Wall Street downgrade, with an analyst fronting a pessimistic outlook regarding the company’s valuation and skepticism surrounding artificial intelligence (AI)-driven smartphone features. The downgrade complicates matters for AAPL, which has had a grim start to 2025. At the close of the last trading session, the stock was valued at $229.98, up almost 1% for the day.  The equity is down almost 9% year-to-date. Ahead of the market opening on January 21, the AAPL share price showed further weakness, down over 1% to $227.99. AAPL year-to-date price chart. Source: Finbold Analyst’s Apple downgrade In an investor note on January 21, Jefferies analyst Edison Lee downgraded Apple to ‘Underperform’ from ‘Hold’, slashing the price forecast to $200.75 from $211.84. The latest price cut reflects a possible 12% drop from the stock’s current valuation. Lee cited Apple’s expensive valuation of 32x FY25 estimated earnings and a 15% premium to the firm’s long-term discounted cash flow (DCF) estimates. Additionally, near- and mid-term revenue forecasts appear overly optimistic, even after recent downward revisions. Another key factor driving the downgrade is muted consumer enthusiasm for smartphone AI features, including Apple Intelligence. According to the analyst, potential delays in Apple’s advanced packaging roadmap for the iPhone could further exacerbate the lackluster outlook for AI adoption in its devices. “Our view that consumer feedback on AI functions in smartphones, including Apple Intelligence, will remain muted,” Lee said.  Lee also highlighted several catalysts for potential underperformance, including Apple’s upcoming Q1 FY25 results, revenue guidance for Q2, and the sales trajectory of the iPhone 17. iPhone’s weak reception  In recent months, much of Wall Street’s outlook on Apple’s stock has revolved around the company’s iPhone sales. Recent data paints a troubling picture, complicating matters for the firm’s flagship smartphone brand. For…

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Filed under: News - @ January 21, 2025 11:22 am