Investing.com – Wall Street analysts downgraded Apple stock this week, sending its shares sliding more than 2% in premarket trading on Tuesday.

Jefferies analysts slashed their Apple Inc (NASDAQ: ) stock rating to Underperform from Hold on Monday as they expect the tech giant to miss earnings and guidance targets in its upcoming fiscal Q1 2025 report.

The company’s price target on the tech giant’s shares was also reduced to $200.75 from $211.84, implying a 13% downside from the last closing price.

The bearish expectations come amid weak iPhone sales and a gloomy outlook for the iPhone 17 and 18 due to “slow AI uptake and commercialization,” analysts said in a note.

They projected Apple to miss its revenue growth guidance of 5% for the first quarter and to guide only low single-digit revenue growth in the second quarter, also below consensus.

Jefferies lowered its forecast for iPhone shipments from 1% growth to a 2% decline for the first quarter of fiscal year 2025, based on data showing a nearly 4% year-over-year decline. decrease in iPhone shipments during this period, according to the International Data Corporation (IDC).

Sales of iPhones in China in the same quarter are reported to have declined significantly, while international markets may see marginal growth. In addition, the outlook for other Apple products such as iPads and MacBooks is bleak due to the general weakness of the consumer electronics market.

The downgrade in Apple stock also reflects concerns over its March quarter guidance, which analysts believe will disappoint investors. Despite optimism about demand in China due to government subsidies, the new policies will limit these subsidies, effectively excluding most iPhone models.

“We also believe that the demand for SE4 will be weaker than expected, because it is likely to compete not so much with Android or iPhone 14/15, but with the iPhone 13/14 P/PM,” said the analysts led by Edison Lee.

“We don’t think consumers will be attracted to the SE4 because of Apple Intelligence, especially in China,” they added.

In addition, Jefferies’ group suggests that the near-term outlook for AI in smartphones has been overcome, as a third-party survey shows that US consumers do not find smartphone AI particularly useful.

Industry reviews have also raised the possibility of delays in Apple’s advanced packaging roadmap, which is crucial for improving the iPhone’s AI capabilities. This uncertainty is attributed to the slow monetization of AI, which dampens expectations for a significant AI-driven upgrade cycle.

“Even if the iPhone has new form factors in the next 2 years, volume growth is likely to be slower if AI takes longer to materialize,” the analysts explained.

For these reasons, they cut earnings per share (EPS) forecasts for Apple by 2% to 23% over the next three years, with fiscal year 2025 (FY25) and FY26 EPS estimates of now estimated at 4% below consensus.

In fact, Loop Capital analysts also cut their rating on Apple stock to Hold from Buy, citing expectations of “material iPhone demand decline” starting in the March quarter but “material growth” in the June and September quarters.

“Therefore, while the foundation of our 7/15/24 structural Buy call could still happen, it currently remains unclear in terms of timing, and certainly not in the next nine months given that we are in ahead of 2.5 quarters of materially softening iPhone demand,” added Loop analyst Ananda Baruah.