Apple Inc. (NASDAQ:AAPL) could see a potential downside of approximately 21%, according to a recent downgrade by KeyBanc Capital Markets. The firm cited data indicating a 2% month-over-month decline in U.S. hardware spending, contrasting sharply with a three-year average growth of 9%. This trend suggests that Apple’s hardware growth is normalizing after a surge in demand driven by tariffs last year.
Key Details
For the June quarter, KeyBanc's Key First Look Data (KFLD) showed a year-over-year spending increase of 4%, up from a -6% drop in May. However, the quarterly performance still fell short, with a sequential decline of 2.7%. Analysts had expected a smaller decline of 4.3%. The downgrade reflects concerns over rising prices for Apple products, which could lead to reduced demand. KeyBanc noted that price increases on products like the iPad and Mac could push demand into a more elastic zone, where each dollar increase in price risks losing more than one unit in sales.
Background
Despite these challenges, KeyBanc forecasts a 23.2% increase in iPhone revenue for FY26, surpassing the consensus of 19.7%. However, growth is expected to slow to 4.9% in FY27, compared to the Street's estimate of 8.3%. The firm also revised its Services growth outlook downward, anticipating a deceleration in FY27.
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The downgrade could negatively affect Apple’s stock price, impacting technology sector indices such as the Nasdaq. Investors may reassess their positions in tech stocks amid concerns over hardware growth and pricing strategies.
Watch for Apple's upcoming earnings report, scheduled for later this month, which will provide further insights into its performance amid these challenges.