Before the key financial report next week, Wall Street's third Apple "sell" rating has appeared!

Apple's Q3 financial report is approaching, but KeyBanc Capital Markets is pouring cold water: Apple's growth expectations may be too optimistic.

Analyst Brandon Nispel from the institution downgraded Apple to underweight, believing that the market's expectations for a major turning point in Apple's business are too aggressive.

Nispel believes that the assumption of Apple achieving the highest growth in over three years and reaching a business inflection point "is not realistic." This is the first time KeyBanc has downgraded Apple since tracking the company three years ago.

"Apple is an impressive company, but we believe it holds unrealistic fantasies about growth in all product categories and regions."

According to Bloomberg data, the stock currently has 39 buy ratings, 18 hold ratings, and 3 sell ratings. Nispel's new target price is $200, one of the lowest on Wall Street.

In pre-market trading, Apple's price is $229 per share.

Apple may struggle to achieve comprehensive growth, iPhone SE may cannibalize iPhone 16 sales

As the earnings season for the "Big Seven" companies kicks off, Tesla's outstanding performance sets the stage. Apple is scheduled to release its financial report on October 31, with expectations for iPhone sales to rebound after two quarters of decline.

Data from Counterpoint Research shows promising signs for the iPhone 16s, with a 20% increase in sales in the first three weeks of its launch in China compared to the 2023 model.

While the market generally expects Apple's revenue growth across various products and regions to accelerate next year, Nispel remains cautious.

He points out that historical data shows that in the past 10 years, Apple has only achieved synchronized growth across all product lines once, and only twice in the past 20 years. In terms of regions, Apple has only achieved comprehensive growth across five regions three times in the past 10 years.

"Although Apple may achieve this feat, we believe it is unlikely."

Furthermore, Apple is set to produce an updated version of the iPhone SE, hoping this revamp will help it compete in the low-end smartphone market. However, Nispel warns that this update may not result in a net increase in iPhone 16 sales.

He cited a consumer survey conducted by KeyBanc, which found that while respondents showed strong intent to upgrade to the iPhone 16, their interest in the iPhone SE was equally high.

"We believe investors' expectations for iPhone SE sales are too optimistic, as our research indicates it has more cannibalization potential.

Given Apple's market value far exceeding historical levels, peers, and the broader market, we believe the stock may underperform, requiring a significant beat to rise, which we do not anticipate happening. **”