KeyBanc downgrades Apple to "reduce" for the first time in three years due to expectations being "unrealistic"

KeyBanc Capital Markets stated that the expectation of a comprehensive rebound in all businesses of Apple Inc. (AAPL.US) is unrealistic. Analyst Brandon Nispel downgraded the stock rating of this tech giant from neutral to underperform, stating that the previous assumption was "too aggressive," that the company would achieve its highest growth rate in over three years, and that the business would undergo a major turning point. This is the first time the institution has taken a bearish view on Apple since covering the stock three years ago.

Nispel wrote in a report released after the market closed on Thursday, "Apple is an impressive company, and we believe that the expectation of achieving accelerated growth in all product categories and regions is unrealistic." As of the time of writing, the stock fell by 0.3% in pre-market trading.

Among analysts tracked by Bloomberg, there are currently 39 buy recommendations, 18 hold recommendations, and 3 sell recommendations for the stock. Nispel's new target price is $200, one of the lowest on Wall Street, implying a 13% decline in Apple's stock price from Thursday's closing.

The third-quarter financial reports of the seven giants of the U.S. stock market are being released one after another, with Tesla's (TSLA.US) impressive performance leading the way. Apple is set to release its financial report on October 31, with expectations of growth in iPhone sales revenue after two consecutive quarters of decline. According to Counterpoint Research data, sales of the iPhone 16 in China in the first three weeks exceeded those of the 2023 model by 20%, showing positive signs.

While the market expects Apple's revenue to accelerate in all product categories and regions next year, Nispel is not as optimistic. The analyst cited historical data, pointing out that Apple has only achieved growth in all areas once in the past 10 years and only twice in the past 20 years. From a geographical perspective, the company has shown growth in all five regions only three times in the past decade.

Nispel said, "Although Apple seems likely to achieve this feat, we believe it is difficult to achieve."

Earlier reports from foreign media indicated that Apple is about to produce an updated version of the iPhone SE, hoping that this overhaul will help it compete in the low-end smartphone market.

However, Nispel pointed out that recent consumer survey data conducted by KeyBanc showed that this improvement may not result in a net increase in iPhone 16 sales. While respondents expressed a strong desire for iPhone 16 upgrades, they also showed interest in the iPhone SE.

Nispel stated, "We believe that investors' assumptions about iPhone SE sales are too optimistic, as our research indicates that the iPhone SE is more of a cannibalization within the same category." "Given Apple's stock price premium relative to historical levels, peers, and the overall market, we believe the stock may underperform and would need to significantly exceed expectations to rise, which we do not believe will happen."