Apple (AAPL) stock is gained ground Friday even after financial services firm KeyBanc downgraded the Magnificent 7 stock to Underweight (equivalent to a Sell) from Standard Weight (equivalent to a Hold), with a price target of $200.
Apple has been on a roll in 2024, up 21% for the year to date, to make it one of the best-performing Dow Jones stocks. But KeyBanc analyst Brandon Nispel is concerned about iPhone 16 sales. He thinks customers will favor buying the new lower-priced iPhone SE model, which is expected to launch in early 2025, over the costlier iPhone 16, according to Barron's.
The iPhone 16 price ranges from $799 to $1,199, while the iPhone SE 4 is expected to cost around $499, by some estimates.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Nispel cited a recent survey that found 59% of respondents said they were interested in upgrading to the iPhone 16, and of those likely or extremely likely to upgrade, 61% indicated interest in the iPhone SE.
"This shows the iPhone SE isn't incremental, and could possibly be cannibalistic to iPhone 16 sales," the analyst said, adding that a successful launch of the iPhone SE would lead to an increase in iPhone units sold but a decline in average selling prices.
Nispel's $200 price target represents a discount of about 14% to current levels.
Apple could do well in China's thriving smartphone market
On a positive note for Apple, smartphone shipments in China rose 3.2% year over year in the third quarter, marking its fourth consecutive quarter of expansion, according to the International Data Corporation's Worldwide Quarterly Mobile Phone Tracker.
Apple came in second for smartphone companies, driven by the launch of its new iPhone 16 series, and its artificial intelligence (AI) model Apple Intelligence is expected to drive future demand.
"A significant wave of device upgrades is propelling the sustained recovery of the Chinese smartphone market," IDC senior research analyst Arthur Guo said in a statement. "Despite ongoing economic challenges, consumers are highly motivated to purchase new smartphones after three years of pent-up demand."
Apple is still a Buy for most of Wall Street
The majority of Wall Street remains bullish toward the blue chip, suggesting investors shouldn't be too worried about KeyBanc's downgrade of one of Warren Buffett's favorite stocks.
According to S&P Global Market Intelligence, the average analyst target price for AAPL stock is $239.82, representing implied upside of roughly 3% to current levels. Additionally, the consensus recommendation is Buy.
Financial services firm CFRA is one of the more bullish outfits on AAPL stock with a Buy rating and $260 price target.
Looking ahead to Apple's upcoming earnings event, slated for after the close on Thursday, October 31, CFRA Research analyst Angelo Zino is expecting year-over-year services growth of 13%, "while anticipating more insights around the rollout of AI (initially only available in English), with international expansion to be a bigger story in calendar year 2025 and calendar year 2026."
Zino adds that "AAPL could refresh its Macs this fall, with internal M4 processors, while Wearables is set to return to growth given recent upgrades to the Watch and AirPods product lines."
Related Content
-
The Shutdown Standoff Is Heading for Its Next Big TestA key mid-October deadline could intensify the shutdown fight in Washington, and the fallout could soon hit workers and your wallet.
-
Should You Buy Gold as It Tops $4,000? Here's What the Experts SayRate cuts, a weak dollar and macro uncertainty have helped create a "perfect storm" for gold this year. Should investors add exposure or is it too late to buy?
-
Should You Buy Gold as It Tops $4,000? Here's What the Experts Say
Rate cuts, a weak dollar and macro uncertainty have helped create a "perfect storm" for gold this year. Should investors add exposure or is it too late to buy?
-
Preferred Bank Stocks: The Investment Retirees (and Others) May Be Missing Out OnMost large banks issue preferred stocks that pay out fixed dividends, often with higher yields than bonds. Should you make room for them in your portfolio?
-
Don't Let Your Equity Compensation Trip You Up: A Financial Expert's GuideStock options, RSUs and other executive perks can come with some serious strings attached. To avoid a nasty tax surprise, you need a plan.
-
Rally Fades on Mixed AI Revolution News: Stock Market TodayAll three main U.S. equity indexes opened higher but closed lower as a seven-session winning streak for the S&P 500 came to an end.
-
The Spendthrift Trap: Here's One Way to Protect Your Legacy From an Irresponsible HeirA spendthrift clause in an estate plan can protect an inheritance from a financially irresponsible child's debts and poor decisions.
-
Adapting to AI's Evolving Landscape: A Survival Guide for BusinessesLike it or not, AI is here to stay, and opting out could be disastrous for your organization. Instead, focus on what you can control and be flexible, as AI is still evolving.
-
S&P, Nasdaq Hit New Highs: Stock Market TodayA late-day rally wasn't enough to lift the Dow into the green as its six-session winning streak came to an end.
-
AMD Stock Surges on OpenAI DealAdvanced Micro Devices could see tens of billions of dollars in new revenue from the ChatGPT maker as the AI infrastructure buildout accelerates.
