Apple Inc. (AAPL, Financial) experienced a decline of over 1% recently, influenced by a Jefferies analyst's assessment that investor expectations for Apple’s latest iPhone model, its first with artificial intelligence tools, may be overly optimistic.
Jefferies analyst Edison Lee, who reassessed Apple and shifted his rating from “buy” to “hold,” commented that expectations for the iPhone 16/17 models are immature. According to Lee, the market's high expectations for a 5%-10% increase in sales are unlikely to materialize due to a lack of substantial new features and limited AI integration.
Apple’s stock has rebounded about 36% from April's low, largely due to market optimism that AI capabilities would drive consumers to upgrade their phones, boosting revenue growth. However, early signs suggest mixed demand. Lee acknowledges the long-term potential of AI, recognizing Apple as uniquely positioned to offer low-cost, personalized AI services due to its proprietary data.
Despite this potential, Lee indicates that current valuations are high, and AI won’t be a short-term growth driver. He anticipates that smartphone hardware will need redesigning to accommodate true AI capabilities, possibly by 2026/2027.
Compared to other major tech firms, Wall Street exercises more caution with Apple. About 65% of analysts recommend buying Apple shares, whereas Microsoft, Nvidia, and Amazon have buy recommendations closer to or above 90%.
