Apple ( NASDAQ: AAPL It has been upgraded to Hold from Underperform by Jefferies because of its recent decline in stock price, coupled with the risks related to tariffs.
Nevertheless, the investment company decreased its price target to $167.88 from $202.33 and cut down its forecasts for iPhone shipments over the following three fiscal years.
Jefferies analysts, headed by Edison Lee, stated in a report released on Wednesday that they still believe AAPL will avoid U.S. tariffs due to their planned $500 billion investment in the country over the coming four years and our expectation that Apple might increase its domestic production commitments—such as making iPhones here," he explained. However, the increasing likelihood of a worldwide economic downturn could exacerbate the already sluggish demand for iPhones.
Throughout the entire duration of fiscal years 2025, 2026, and 2027, Jefferies lowered its forecast for iPhone shipments by 3.6%, 7.7%, and 5.5%, correspondingly. Consequently, this resulted in projected yearly revenue decreases of 2%, 4.1%, and 3.5%, respectively, during these periods.
These cuts are not solely attributable to the effects of tariffs and the possibility of a worldwide economic downturn, but they're also because of weak consumer interest in present AI features available on mobile phones.
"We think the two main challenges for AI on smartphones (not restricted to iPhones) are: insufficient high-speed DRAM and advanced packaging technologies like those found in HBM and CoWoS systems, which constrain the size of AI models; as well as inadequate access to application data, thereby limiting our comprehension of users' social/business connections, daily routines, and behaviors," Lee stated.
Jefferies forecasts that the required hardware for operating bigger AI models on smartphones won’t hit the market until 2027, with the iPhone 19 expected to be the pioneering device featuring this technology.
According to a Reuters report, Luxshare, a Chinese electronics component maker and a major assembly partner for Apple, appears to be in discussions about shifting additional manufacturing out of China.
The U.S. has enacted a 104% tariff on Chinese products.
Luxshare, the company responsible for assembling iPhones and manufacturing AirPods, stated that the tariffs would not significantly impact its revenues since a substantial portion of its completed goods are sold in markets beyond the U.S., according to the report.
“If we receive a commercial assurance and can perform a thorough assessment, we aren’t ruling out the possibility of adapting certain products to suit the requirements of the U.S. market,” stated Wang Laichun, chairman of the Luxshare board of directors, as reported by Reuters.
Apple shares were up about 3.5% During the early trading session on Wednesday. They have declined 28% year to date.
More on Apple
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