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.
Sign up for Kiplinger’s Free E-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
-
Trader Joe’s Expansion 2025: Full List of New Store LocationsTrader Joe’s is opening 21 new stores in 2025 across 13 states and Washington, D.C. See if a location is coming to your city and what makes this beloved grocer stand out.
-
Despite Economic Uncertainty, Americans Remain Confident About Retirement, Survey ShowsSaving and spending is a concern but most workers and retirees think they are on track based on a new survey.
-
Before You Invest Like a Politician, Consider This DilemmaAs apps that track congressional stock trading become more popular, investors need to take into consideration some caveats.
-
How to Put Together Your Personal Net Worth StatementNow that tax season is over for most of us, it's the perfect time to organize your assets and liabilities to assess your financial wellness.
-
Stock Market Today: Trump Retreats, Markets RejoiceStocks rally, yields soften, the dollar rises, and even beaten-down names enjoy the wages of potential trade peace.
-
Tesla Stock Pops as Elon Musk Promises DOGE Draw BackTesla reported a sharp drop in first-quarter earnings and sales, as the EV maker suffered a backlash to its CEO's political ambitions.
-
Bouncing Back: New Tunes for Millennials Trying to Make ItAdele's mournful melodies kick off this generation's financial playlist, but with the right plan, Millennials can finish strong.
-
Early-Stage Startup Deals: How Do Convertible Notes Work?Some angel investors support early startups by providing a loan in exchange for a convertible note, which includes annual interest and a maturity date.
-
Stock Market Today: Stocks Soar on China Trade Talk HopesTreasury Secretary Bessent said current U.S.-China trade relations are unsustainable and signaled hopes for negotiations.
-
How Can Investors Profit From AI's Energy Use?Global energy demand is expected to grow by leaps and bounds over the next several years as AI usage accelerates. Here's how to get a piece of the pie.
