Jefferies has downgraded Apple (AAPL, Financial) from a "Buy" to a "Hold" with a target price of $205, citing overly optimistic expectations for the iPhone's performance. The stock was down about 1% in pre-market trading.
Analyst Edison Lee highlighted that while Apple is poised for long-term success in AI due to its unique ability to offer cost-effective, personalized AI services, significant redesigns in smartphone hardware are necessary for implementing true AI, a process that might not conclude until 2026/27. He believes the expectations for iPhone 16/17 are premature.
Lee also noted that the anticipated 5% to 10% growth in iPhone sales seems unlikely due to the lack of substantial new features and limited AI capabilities. He projects only a 2.5% growth rate for the iPhone 16 cycle.
Despite these short-term concerns, Apple’s potential in AI remains promising, partly due to its collaboration with OpenAI and its efficient large language models. The company's Ferret UI model is particularly focused on comprehending user interactions on mobile screens. Lee emphasized that Apple's integrated chip, OS, and AI ecosystem gives it a significant edge over fragmented Android competitors.
