Jefferies has downgraded Apple stock to underperform from hold, cutting its price target for the company to $263.66 from $285.56. The firm believes Apple has cancelled its all-glass design for the still-unannounced iPhone 20, a decision based on supply chain checks.
Apple shares fell approximately 1.5% following the downgrade announcement on Monday.
Jefferies analyst Edison Lee stated that the all-glass iPhone was cancelled due to low yield. He described this as a major setback to efforts to bring in higher-priced iPhones amid soaring memory costs. The firm had believed the all-glass body would eventually be migrated to the iPhone Pro and iPhone Pro Max models to raise their selling price and margin.
The folding iPhone is the only key driver of higher ASP and margin.
Lee noted that the folding iPhone would be niche at over $2,000. Expectations have shifted significantly toward this foldable model, which analysts view as critical for maintaining premium pricing strategies. Apple's strategy in recent years has been to raise average selling price through new designs and premium devices.
Rising Costs and AI Concerns
Rising demand from AI data centers is redirecting global memory manufacturers' capacity toward higher-margin AI products, pushing up prices of standard memory used in phones, tablets and computers. To ease cost pressure, Apple has been testing products from Chinese memory manufacturer CXMT.
Jefferies cited limited progress on AI as one of the reasons for its downgrade. While Microsoft, Google, Meta and Amazon are rolling out new AI products rapidly with billions of dollars in AI investments, Apple is proceeding more cautiously. Some investors view this controlled approach as a disadvantage, though Apple positions its on-device AI as a strategic advantage in security and privacy.
Diverging Analyst Views
KeyBanc Capital Markets downgraded Apple last month citing concerns about iPhone demand and the company's valuation. Jefferies' price target has not been above Apple's actual stock price for years. Before trading opened on August 10, Apple's stock price was $310.00, closing at $313.33 on Friday.
The consensus average price target for Apple, including Jefferies' revised estimate.
Reports on analyst ratings differ. One account states that the number of firms giving a sell or equivalent rating on Apple rose to at least six, the highest level since 2012, with Jefferies being one of three firms with an underperform rating. However, CNBC data on 47 covering firms shows zero sell ratings, three underperform ratings, 14 holds, 20 buys, and 10 strong buys. The highest price target for Apple is $400.
Despite the downgrade, analysts supporting Apple cite the company's broad user base, services revenue and strong cash generation capacity as key strengths.
