Analysts Downgrade Apple Rating

Investing.com — Analysts at KeyBanc have downgraded their rating of Apple (NASDAQ: AAPL) to Underweight from Sector Weight, citing concerns over the sales of the tech giant's flagship iPhone device.

In a note to clients, KeyBanc analysts Brandon Nispel indicated that a survey conducted by the investment bank showed demand for the lower-cost iPhone SE is "not purely additive" to overall smartphone sales.

Meanwhile, other data suggests that the rate of phone upgrades in the US is "unlikely to move higher" in the near term. Some strategists had predicted that Apple could experience an influx of customers upgrading their older devices to utilize recently-announced AI capabilities in the new iPhone 16 model.

Nispel noted, "Our survey shows that 59% of respondents are interested in upgrading to iPhone 16, which appears strong. However, of those likely to upgrade, 61% are interested in the iPhone SE. This indicates the iPhone SE may not be incremental and could cannibalize iPhone 16 sales."

He argued that expectations for "Apple's highest growth in 3+ years and major inflections across all geographies and products" are unlikely to materialize, as such increases have "rarely occurred throughout history."

Furthermore, with Apple's shares trading at about 23 times 12-month forward earnings and a five-times premium over the tech-heavy Nasdaq Composite index, the stock appears "expensive relative to its history and peers." Nispel pointed out that Apple’s three-year average valuation is roughly 20 times forward earnings while the Nasdaq's historical premium is 3 times.

In premarket US trading, Apple shares were lower.

Additionally, figures from researcher IDC revealed that iPhone sales in China declined by 0.3% in Q3, while rival Huawei's sales surged by 42%, highlighting intensifying competition in the world's largest smartphone market.