iPhone sales suffered a "Waterloo". Jefferies Financial Group Inc. downgraded Apple Inc. (AAPL.US) to "underperform the market".

Jefferies Financial Group Inc. has downgraded Apple Inc. (AAPL.US) from "hold" to "underperform" and lowered the target price from $211.84 to $200.75. The firm expects that Apple Inc.'s upcoming earnings and guidance will fall short of expectations. Apple Inc. is scheduled to announce its first-quarter earnings after market close on January 30. Analysts led by Edison Lee stated that they have lowered their forecasts due to weak iPhone sales and overall performance in the consumer electronics market, while Jefferies Financial Group Inc. has lowered its expectations for iPhone 17/18 due to the slowing pace of artificial intelligence proliferation and commercialization. Analysts project that Apple Inc.'s revenue growth in the first quarter of the 2025 fiscal year will not meet the expected 5%, and revenue growth in the second quarter will only be in the single digits, lower than expected. Analysts added that the outlook for artificial intelligence is dim, and their industry checks indicate that Apple Inc.'s advanced packaging roadmap for the iPhone may face delays, which is another negative sign. Lee and his team noted that the recent weak sales of iPhones and consumer electronics products are worse than expected, but the iPhone SE4 may drive year-over-year revenue growth in the June quarter. Analysts pointed out that their concerns about weak iPhone demand have become a reality, citing IDC data showing that Apple Inc.'s shipments in the first quarter of the 2025 fiscal year fell by about 4% year-on-year. In addition, Lee added that earnings guidance for the March quarter may also disappoint, and noted that despite optimism about Chinese demand in the market considering government subsidies, the 2025 new policy will limit smartphone subsidies to a maximum of 500 yuan per phone, compared to 1000 yuan in the fourth quarter of 2024, and only covering phones with an average selling price below 6000 yuan, excluding most iPhone models. Analysts also believe that the demand for the iPhone SE4 (equipped with only one camera but featuring Apple Intelligence) may be weaker than expected, as its competitors are likely not Android or iPhone 14 and 15, but rather second-hand iPhone 13/14 pro and pro max. Analysts stated that they have decided to downgrade their rating because they believe that consumers' feedback on smartphone artificial intelligence features, including Apple Intelligence, will continue to remain subdued. According to Counterpoint Research data, iPhone sales in China declined by 18.2% in the fourth quarter of 2024, while the recovering Chinese competitor Huawei took the top spot.