TMTPOST -- Apple Inc. shares as much as 4.6% and finished 3.2% lower to $222.64 on Tuesday, the lowest close since November 4. Shares were hampered after the Wall Street downgrades raised concerns over weak iPhone sales and less-than-expected consumers’ appetite for interest artificial intelligence (AI).

Credit：Apple

Jefferies analysts on Monday downgraded Apple from hold to underperform, a rating that rarely showed pessimism for the iPhone maker. They cut their price target on Apple by 13% to $200.75, representing a 9.8% decline from Tuesday close. Analysts led by Edison Lee warned iPhone demand would suffer a material reduction ahead of the next generation iPhone released this year.

"We lower forecasts driven by weak iPhone sales and the general [consumer electronics] market and our reduced outlook for iPhone 17/18 due to slower AI uptake and commercialization," Jefferies analysts wrote. They said Apple’s revenue for the quarter ended December may miss the guidance of 5% growth, and its guidance for the following March quarter could also disappoint.

The analysts noted iPhone sales in China, the world’s top smartphone market, fell between 15% and 20% year-over-year (YoY) in part due to Apple’s big push into AI that isn’t panning out as investors had hoped. They anticipated iPhone revenue will drop 0.4% YoY for the first quarter, while total Apple sales will grow 2.8%, slower than the firm’s prior estimate of 4.6%.

Loop Capital analyst Ananda Baruah lowered his rating for Apple to Hold from Buy, with a revised price target of $230, 16% down from $275. The analyst also cited risks of iPhone demand.

"We're downgrading to Hold on the heels of work from Loop Capital Supply, Chain Analyst John Donovan that suggest a material iPhone demand reduction beginning in the Mar Quarter but materially amplifying in the June and Sept. As such, while the foundation of our 7/15/24 structural Buy call could still materialize, it now remains unclear on timing, and it certainly won't be for the next nine months given we're on the front end of 2.5 Q's of materially softening iPhone demand. Our $230 PT is 31x our new CY2025 EPS of $7.31," said Baruah.

JPMorgan analysts on Tuesday maintained their Overweight rating for Apple but reduced their price target to $260, nearly 2% from the previous target $265. Their concerns on Apple’s outlook resulted from the strong dollar at a time of limited appetite for Apple products, and "flattish unit sales" given the current AI features, as well as weak China demand. They believed Apple will continue to lose market share in China as it's already "past its product cycle peak", and the company's premium phones don't benefit from local government subsidies for low-to-mid-tier phones.

Earlier this month, Ming-Chi Kuo, a reliable Apple analyst who is well-known for his accurate predictions over a decade, flagged near-term risks for the iPhone maker. In his note released on Monday, the analyst at TF International Securities expected iPhone shipments in the first half of 2025 to decline about 6% YoY, though shipments for the first quarter would be roughly flat YoY due to front-loading in January ahead of the incoming Trump administration’s tariff policy.

According to Kuo, overall smartphone shipments in China in December were about flat compared with the same month in 2023, but iPhone shipments that month dropped about 10%-12% YoY, reflecting a continued slide in Apple’s Chinese market share.

Kuo said he is not bearish on the long-term prospects of Apple Intelligence, the personal artificial intelligence (AI) system that Apple unveiled in last June and is still not available in China yet. However, Kuo’s latest supply chain survey indicated Apple Intelligence has not boosted iPhone replacement demand, and he also found its appeal has significantly declined compared to cloud-based AI services, which have advanced rapidly in subsequent months.

"There is no evidence of Apple Intelligence’s ability to benefit hardware replacement cycles or service business. As such, it should be cautious of potential downside risks created by earlier market over-optimism,” Kuo wrote.