Apple Stock Slides as Wall Street Sours on Canceled Glass iPhone
Investment firm Jefferies cut Apple to a sell-equivalent rating after supply chain checks suggested the company dropped plans for an all-glass iPhone tied to the device's 20th anniversary, adding to worries over memory costs and slowing sales.
Apple's stock took another hit this week after Jefferies, a Wall Street investment firm, downgraded the company from "hold" to "underperform," the equivalent of a sell rating. The firm also cut its price target on Apple shares from $285.56 to $263.66, according to Fortune.
Jefferies made the move after checks on Apple's supply chain suggested the company had scrapped plans for an all-glass iPhone that had been expected to launch next year to mark the phone's 20th anniversary, Fortune reported. The firm had expected that device to sell at a premium price and help lift Apple's average sale price across its iPhone lineup.
"We believe this shows that introducing new form factors in the iPhone to drive higher [average selling price] is more difficult than expected," Jefferies analysts wrote, according to Fortune.
A Sell Rating Not Seen Since 2012
Apple now has sell-equivalent ratings from at least six Wall Street firms, according to a Bloomberg estimate cited by Fortune. That matches a high last reached in 2012, shortly after the death of Apple founder Steve Jobs. KeyBanc Capital Markets had already lowered its own rating to underweight in July over concerns about iPhone demand, Fortune reported.
The slide follows comments Apple made in late July, when the company said iPhone sales, which make up roughly half of its business, would grow at only a "mid-teens" percentage rate in the current quarter. That would mark a sharp slowdown from the 22 percent growth the iPhone business posted the quarter before, according to Fortune. Apple also warned that its profit margins would come under pressure.
Memory Costs and a New Chief Executive
Jefferies now expects Apple's rumored foldable phone, which the company may unveil at its annual iPhone launch event in early September, to be its only real driver of higher margins this year. Even that device is expected to carry a steep price because of rising memory chip costs, with Jefferies estimating $2,199 for a 256 gigabyte version and $3,099 for a 2-terabyte version, Fortune reported.
Surging demand for memory chips used in AI data centers has driven up prices industrywide, and outgoing Apple chief executive Tim Cook has said the market for those chips is dominated by just three companies: Micron, SK Hynix and Samsung, according to Fortune. Apple has already raised prices on its Macs and iPads because of the shortage and has reportedly been testing memory chips from China's CXMT, a move that could draw objections from the White House, Fortune reported.
The setback comes as John Ternus, a longtime Apple executive, prepares to take over as chief executive next month, succeeding Cook. Fortune reported that Ternus faces investor pressure over Apple's artificial intelligence strategy and whether he can restore the company's product design edge. Cook has said Apple's push to run more AI directly on devices, rather than in the cloud, could become "a competitive weapon" for privacy-minded customers, according to Fortune.
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