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Investing.com -- Jefferies analysts downgraded Apple to Underperform from Hold in a note Friday, citing what they see as “excessive expectations on 18 Fold, and the replacement cycle,” despite raising iPhone unit growth forecasts for FY25/26/27 to 7%/1%/-1% from 5%/-3%/0%.
The firm said that “better demand for 17 [iPhone] is likely driven by no price hike in P/PM and an effective price cut for the base, not due to new form factor or tech innovations.”
Jefferies noted that iPhone 17 PM resale prices remain “at a premium of 5% to 15% for all variants, vs only one variant trading at a premium last year.”
Stronger China demand is also attributed to “deeper price cut at the base model than outside China” and “highest trade-in value offered for iPhone 15/16 among major markets.”
However, Jefferies warned that “more positive sales momentum has inflated expectations on the replacement cycle and prospects of the 18 Fold.”
They added that the foldable device faces challenges, including price and market size: “We do not doubt AAPL will be able to make the most beautiful foldable phone in the market, but the question is the TAM of a US$2K phone.”
The note highlighted competitive pressure from Samsung, whose Galaxy Z Fold 7 display is “nearly crease-free, and its thickness (unfolded) at 4.2mm is even thinner than the 17 Air at 5.5mm,” with industry expectations of annual volumes “no more than 3m units.”
Jefferies concluded that Apple’s current valuation “prices in overly bullish iPhone outlook,” noting that even with a US$100 price hike for the iPhone 18, their discounted cash flow model “remains little changed at ~US$205, or US$800bn below the current market cap.”
They said this implies demand for foldable iPhones “100% above JEFe” forecasts, underpinning the downgrade.