Apple dips after KeyBanc cuts rating on iPhone sale concerns

KeyBanc downgraded Apple’s (NASDAQ:AAPL) stock to Underweight from Sector Weight with a $200 price target.

Apple’s stock dipped about 1% premarket on Friday.

The firm said its consumer survey “disproves one major bull case” that the iPhone SE is not purely additive to iPhone sales.

The analysts said their survey shows that 59% of respondents are interested in upgrading to iPhone 16, which appears strong. However, the survey also shows that among these people, 61% are interested in the iPhone SE. The analysts think this shows the iPhone SE is not incremental, and could possibly be cannibalistic to iPhone 16 sales.

If the iPhone SE is successful, iPhone units could increase but average selling prices could fall, contrary to consensus, according to the analysts.

In addition, the analysts cited data points surrounding U.S. iPhone upgrades, a reason for the rating cut.

The analysts think the data suggests a slow upgrade path. After earnings from AT&T (T), and T-Mobile US (TMUS) and Verizon Communications (VZ), the average postpaid upgrade rate fell to 3%, down 9% year-over-year from 3.3% last year.

While the rate of decline is improving compared to -11% year-over-year in the second quarter, the analysts continue to believe upgrade rates will be down mid-single digits in the fourth quarter and low single digits in the first half of 2025.

As Apple Intelligence is initially rolling out in English and only in the U.S., other markets are likely to be even further behind the U.S., the analysts added.

KeyBanc noted that an inflection across all products and geographies is unrealistic. Consensus expects Apple’s 2025 revenue growth to accelerate higher and to grow across all product categories and geographies. However, historical data shows that these appear to be aggressive assumptions.

The analysts added that Apple’s valuation appears expensive, no matter how they measure.