KeyBanc’s downgrade of Apple’s (NASDAQ:AAPL) $200 price target to underweight sends a strong signal that the wave of iPhone 16 upgrades may not be the growth driver many expected. I am. Consumer research reveals worrying trends. While 59% of respondents expressed interest in upgrading to iPhone 16, 61% are also eyeing the lower-priced iPhone SE. This overlap suggests the iPhone SE may be cannibalizing iPhone 16 sales rather than adding to them, posing a major threat to Apple’s average selling price. The idea that revenue growth will accelerate across all product categories and regions by 2025 seems like wishful thinking.
The outlook becomes even more bleak considering the slow pace of smartphone upgrades in the US, with the postpaid upgrade rate dropping to 3% from 3.3% a year ago. Despite the hype surrounding Apple Intelligence, questions remain as to whether it can change direction in any meaningful way anytime soon. While AI initiatives have generated some excitement, hopes for a quick recovery seem overly optimistic as consumers and analysts alike wait for clear signs of momentum.
Apple’s valuation, at 32 times forward earnings, makes it even more risky. The company’s next move to launch the latest iPhone SE in early 2025 will require a delicate balancing act. Without careful management of market expectations, Apple risks further volatility in its stock price, especially if consumers continue to gravitate toward more budget-friendly options.
This article first appeared on GuruFocus.
