Despite Tim Cook and the rest of the Apple gang getting behind President Trump recently, analyst Edison Lee of Jeffries downgraded Apple's rating from "Hold" to "Underperform," setting a price target of $200.75. The reason? Lee cited declining iPhone sales, particularly in China, and a lukewarm reception to Apple's AI features as key concerns.
Lukewarm is being nice as many iPhone users have complained that Apple Intelligence's news summarization feature produced misleading or false information, their generative AI tools were "eh," and overall did not enhance or "upgrade" their upgrade as they hoped.
In a discussion with The Wall Street Journal, CEO Tim Cook stated, "We weren't the first to do intelligenceā¦but we will be the best."
Ok thenā¦so, as Apple admits to not being first and playing catch-up, the likes of Loop Capital and JPMorgan will continue to pile on, with Loop lowering its rating from "Buy" to "Hold," highlighting the same disappointments and JP Morgan's Samik Chatterjee reducing his price target to $260 from $265.
Looking at Apple's iPhone revenue trajectory from Q4 2009 to Q4 2024, these analysts concerns make sense. While iPhones historically generated over 60% of Apple's total revenue during peak quarters (notably around 2015-2016), recent data shows a marked decline to just 48.7% in Q4 2024. Data from Statista clearly illustrates this downward trend, with the iPhone's revenue share dropping from consistent peaks above 60% to around 50% in recent quarters. This decline, combined with increased competition in the smartphone market and Apple's apparent lag in AI innovation compared to competitors like Google and Samsung (we're not mentioning China's Vivo or Huawei), signals trouble for the tech giant's core business model, which has no longer been "hitting" quite as hard with die-hard buyers and users. Although Apple has diversified its revenue streams through services and other products (now accounting for nearly 30% of revenue), the iPhone's diminishing share could pose a serious threat to Apple's overall financial health in the future, especially if they can't find a way to find new and old buyers with actual AI day to say use-cases.