Apple stock receives a rare bearish rating as KeyBanc expresses concerns over demand and valuation
KeyBanc Capital Markets has downgraded Apple stock to underweight, citing concerns over demand and valuation. Analyst Brandon Nispel pointed out that Apple's expected price-to-earnings ratio exceeds 33 times, significantly higher than the 10-year average and Nasdaq levels. Additionally, with U.S. carriers reducing subsidies and upgrade rates slowing, he believes the market consensus expectation of an 8% growth in iPhone sales by 2027 is overly aggressive
Apple Inc. has rarely received a bearish rating, as KeyBanc Capital Markets downgraded the stock to underweight due to concerns over demand and valuation.
Brandon Nispel previously rated Apple shares as "hold," stating that the valuation gap relative to the market "makes no sense." The expected price-to-earnings ratio for Apple shares exceeds 33 times, significantly higher than the 10-year average of 23 times and above the Nasdaq 100 index level of 22.8 times.
"We see U.S. carriers reducing device subsidies and slowing upgrade speeds, so international markets may need to bear more growth pressure. In an environment of rising prices, this will become difficult, and we believe the market consensus expectation of 8% iPhone growth in 2027 is overly aggressive," Nispel wrote in a report on July 13.
This downgrade further indicates that Apple is one of the least favored mega-cap tech stocks. Among analysts, less than 60% recommend buying the stock. In contrast, according to compiled data, 90% of analysts covering Microsoft, Amazon, Meta Platforms Inc., and Nvidia give buy ratings on those stocks.
Even so, giving Apple a rating equivalent to "sell" is still considered rare. Currently, only 7% of institutions, including KeyBanc, have issued bearish ratings. Apple closed at $317.31 on Monday, roughly in line with the target price of $319, indicating that analysts expect limited upside for the stock over the next 12 months. KeyBanc's target price is set at $250, implying a downside of over 20% from Monday's closing price.
Apple's stock has performed well this year, rising nearly 16%, making it the best performer among the "Tech Giants." The stock closed at a record high on Monday, recently benefiting from investors pulling out of other areas of tech stocks, particularly semiconductor stocks.
However, Apple has recently raised prices on all Mac, iPad, and home devices to offset the impact of rising storage chip prices. KeyBanc noted that given these price increases, it believes the revenue expectations for Mac and iPad are at risk.
"When this situation is combined with slower sales growth, it implies a slowdown in user growth and drives our service growth expectations down to 7% for fiscal year 2027, well below the market consensus expectation of about 12%," Nispel wrote
