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On Wednesday, Jefferies analyst at the firm upgraded Apple Inc. (NASDAQ:AAPL) stock rating from Underperform to Hold, while also revising the price target downward to $167.88 from the previous $202.33. The stock, currently trading near its 52-week low of $164.07, has seen a significant decline of 23% in the past week. According to InvestingPro analysis, technical indicators suggest the stock is in oversold territory, though current metrics indicate slight overvaluation relative to its Fair Value. The adjustment in the price target reflects concerns over potential impacts of a global recession on iPhone demand, as well as anticipated price hikes for future iPhone models.
The analyst's commentary pointed out that Apple is expected to be exempted from US tariffs, citing the company's commitment to invest $500 billion in the United States over the next four years. With a market capitalization of $2.59 trillion and trailing twelve-month revenue of $395.76 billion, Apple remains a dominant force in the technology sector. InvestingPro subscribers can access 15+ additional exclusive insights about Apple's financial health and market position through our comprehensive Pro Research Report. Additionally, it is believed that Apple will pledge further investments in US manufacturing, potentially including iPhone production. Despite this, there is a growing risk of a global recession which could weaken iPhone demand further.
As a result of these concerns, Jefferies has reduced its iPhone shipment forecasts by 3.6%, 7.7%, and 5.5% for fiscal years 2025, 2026, and 2027 respectively, without altering average selling price (ASP) and margin assumptions. This adjustment leads to a decrease in projected revenue by 2%, 4.1%, and 3.5% for the same fiscal years.
Additionally, Jefferies anticipates a $50 price increase for the iPhone 18 model in 2026 (excluding the base model) and a $100 increase for all models of the iPhone 19 in 2027. These projected price hikes are mainly attributed to higher hardware costs, which are expected to rise due to the inclusion of more memory and the introduction of advanced packaging and fast dynamic random-access memory (DRAM) by 2027.
Following these revisions, the firm's earnings per share (EPS) estimates for Apple for fiscal years 2025, 2026, and 2027 are now 2.5%, 8.5%, and 3.4% below the consensus, respectively. Jefferies' updated analysis reflects a cautious stance on Apple's near-term financial performance amidst a challenging global economic environment. Despite current headwinds, Apple maintains strong fundamentals with a return on equity of 137% and healthy profit margins of 46.5%. For deeper insights into Apple's valuation metrics and future growth potential, including exclusive financial health scores and detailed technical analysis, visit InvestingPro.
In other recent news, Apple has been navigating a series of significant developments. KeyBanc Capital Markets recently adjusted its outlook on Apple, reducing the stock's price target to $170 from $200, maintaining an Underweight rating. This adjustment follows mixed signals in the market, with concerns about potential shortfalls in iPhone and iPad sales despite an increase in spending due to new product launches. Meanwhile, BofA Securities has maintained a Buy rating on Apple, with a $250 price target, suggesting the recent decline in share prices presents an attractive entry point for investors. BofA highlights Apple's stable cash flows and earnings resilience, noting potential benefits from artificial intelligence applications.
Additionally, the European Union is expected to announce soon whether Apple has complied with the Digital Markets Act, a decision that could impact the company's market dynamics. The ongoing trade tensions between China and the U.S. have also been a focal point, with analyst Gene Munster from Deepwater Management expressing concerns about the situation worsening in the short term. Despite these challenges, Munster remains optimistic about Apple's long-term prospects, citing strong brand loyalty. These developments reflect the complex landscape Apple is currently navigating, with varying analyst perspectives on its future performance.
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