Jefferies Upgrades Apple Stock (AAPL) to Hold, But Stays Cautious as 'AI Is Not Yet a Game Changer' | Markets Insider
Jefferies upgraded Apple (AAPL) stock from Sell to Hold and increased the price target from $170.62 to $188.32, as top analyst Edison Lee is positive about the strength in the company’s sales in the June quarter. That said, Lee remains cautious about AAPL stock, as he expects the iPhone maker to issue a subdued outlook for the September quarter. He is also worried about a lack of new features in the upcoming iPhone 17, stating that “AI is not yet a game changer.”
Lee cited Counterpoint data, which indicates that global iPhone sales volumes in April and May increased by 15% year-over-year, marking the strongest growth since the third quarter of 2021. The 5-star analyst believes that tariff-driven pull-in demand and share recovery in China could drive 8% and 10% growth in the June quarter (Q3 FY25) revenue and EPS, respectively, which would be nearly 5% and 9% greater than consensus estimates. Also, the June quarter top-line estimate is better than Apple’s low-single-digit revenue growth guidance.
The analyst estimates that iPhone sales in China grew by 19% year-over-year during the 618 promotions, driving a nearly 10% growth in the first 2.5 months of the June quarter, thanks to targeted discounts and government subsidies. China’s 618 festival is one of the biggest shopping events, during which major e-commerce retailers offer discounts. Lee believes that this is a strong indication that Apple is determined to protect its market share in China, and that Chinese consumers are still willing to buy an iPhone at lower prices. Given these positives, Lee sees a possible surprise for AAPL’s Q3 FY25 results. Consequently, he raised his June quarter iPhone sales volume estimate by 9% to 49.4 million. The revised estimate indicates a 9% year-over-year growth.
However, Lee expects only flat iPhone unit growth in the second half of calendar year 2025 due to pulled-in demand in April and May and a lack of new features for the iPhone 17. In particular, he expects demand in the September quarter to “suffer” due to the demand pulled forward in the June quarter. The analyst reduced his iPhone units estimate for the September quarter by 11% to 46.3 million, reflecting a 6% year-over-year decline.
Furthermore, Lee contends that the market’s “benign view on tariff is likely overly optimistic.” Lee sees the possibility of a roughly 7% hit to Fiscal 2025 and 2026 EPS (earnings per share), even if the U.S. imposes just a 10% tariff on India, a 20% tariff on Vietnam and a 30% tariff on China, which are rates less severe than the ones announced earlier in 2025. Lee also warned about the downside in Apple’s Services revenue.
Overall, Lee remains sidelined on Apple stock, as some risks persist, but believes that “good” Q3 FY25 results could help stabilize the stock over the near term.
Prior to Jefferies’ upgrade, Wall Street assigned a Moderate Buy consensus rating to Apple stock based on 16 Buys, nine Holds, and four Sell recommendations. The average AAPL stock price target of $226.54 indicates a 9% upside potential. Apple stock is down 17% year-to-date.
