KeyBanc downgrades Apple rating, concerned about its growth prospects
KeyBanc Capital Markets downgraded Apple's rating from "Equal Weight" to "Underweight," with a target price of $250. Reasons include weak hardware demand in the U.S., extended upgrade cycles, and slowing growth in the services business, believing the current stock price is overvalued. As a result, Apple's stock price fell more than 1.3%
Investment bank KeyBanc Capital Markets on Tuesday downgraded Apple Inc.'s stock rating from "in line with the market" to "underweight," setting a target price of $250, citing weak hardware demand in the U.S. market and overly optimistic growth expectations for fiscal year 2027.
As a result, Apple's stock price fell more than 1.3% on Tuesday. The stock had just reached a historic intraday high of $323.45 in the previous trading session.
KeyBanc analyst Branden Nispel noted in the report that its proprietary data shows that the U.S. market spending index decreased by 2% month-over-month in June, far below the average growth rate of 9% over the past three years. This suggests that growth in the U.S. market is normalizing after a demand pull-forward triggered by last year's tariffs.
The report lists several core risks: slowing iPhone order growth accompanied by price increases, weak upgrade demand in the U.S. market, and changes in carrier subsidy models; expectations for Mac, iPad, and wearables in fiscal year 2027 may need to be revised downward; and the slowing expansion of the device user base will put pressure on service revenue.
KeyBanc predicts that the growth rate of Apple's service business will slow to 7% in fiscal year 2027, significantly lower than the market's general expectation of around 12%. The firm believes that the three major U.S. carriers are openly discussing reducing device subsidies, which may lead to extended upgrade cycles for users, while international market growth faces challenges from iPhone price increases, making the market's general expectation of 8% growth for iPhone in fiscal year 2027 overly optimistic.
KeyBanc believes that based on its fiscal year 2027 forecast, Apple's current enterprise value to EBITDA ratio is about 24.5 times, with a price-to-earnings ratio of about 35 times, indicating that the stock price is overvalued relative to its historical levels, and its premium over the S&P 500 and Nasdaq indices is unreasonable at more than two standard deviations.
KeyBanc's pessimistic stance sharply contrasts with the mainstream views on Wall Street. Data shows that among the 47 to 48 analysts covering Apple, only two to three have given "underweight" or "sell" ratings
