Investment bank KeyBanc Capital Markets on Tuesday downgraded Apple Inc.'s stock rating from "Sector Weight" to "Underweight," setting a price target of $250. The downgrade cites concerns that iPhone price increases may suppress demand and a weakening growth outlook for the services business. Following this news, Apple's stock price fell over 1.3% during the trading session.
Analyst Brandon Nispel noted in the report that Apple faces multiple risks. Firstly, iPhone order growth is slowing while prices continue to rise. Concurrently, U.S. carriers are openly discussing reducing device subsidies, which could further extend consumers' phone replacement cycles and dampen end-market demand. Secondly, market expectations for growth in Mac, iPad, and wearable devices for fiscal 2027 are overly optimistic and are at risk of being revised downward.
Furthermore, the report suggests the expansion of Apple's device installed base is slowing, which will directly pressure services revenue. KeyBanc forecasts that the growth rate of Apple's services business will slow to approximately 7% in fiscal 2027, significantly below the market consensus expectation of around 12%. Based on this, the firm believes the market's forecast of 8% growth for iPhone in fiscal 2027 appears overly optimistic.
KeyBanc also pointed out that based on its fiscal 2027 projections, Apple's current enterprise value-to-EBITDA ratio is approximately 24.5 times, and its price-to-earnings ratio is about 35 times, indicating the stock is overvalued. KeyBanc's bearish stance contrasts with the prevailing view on Wall Street, where most analysts maintain "Buy" or "Hold" ratings on the stock.
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