KeyBanc Downgrades Apple Stock on Weakening Hardware Demand
KeyBanc Capital Markets downgraded Apple from Sector Weight to Underweight on Tuesday. The investment firm also introduced a price target of $250 per share.
KeyBanc cited weaker hardware demand and concerns that current expectations for Apple’s 2027 growth may be too optimistic.
Apple Spending Data Falls Below Historical Trends
Analyst Brandon Nispel pointed to KeyBanc’s proprietary spending data, known as KFLD.
The data showed that indexed Apple spending declined by 2% month over month in June. By comparison, the three-year average for the same period showed growth of around 9%.
KeyBanc described the result as another month of below-average growth.
The firm believes Apple’s U.S. sales performance is beginning to normalize after tariff concerns encouraged some customers to make purchases earlier than planned last year.
Slower iPhone Demand Creates New Risks
KeyBanc identified several risks facing Apple’s hardware business.
The firm expects iPhone production growth to slow as device prices rise. It also highlighted weak upgrade activity in the United States and changes to the way mobile carriers subsidize smartphones.
These trends could make it harder for Apple to generate strong iPhone growth during 2027.
KeyBanc believes the current market forecast of approximately 8% iPhone growth in 2027 is too aggressive.
Mac, iPad and Wearables Forecasts May Fall
The firm also expects analysts to reduce their 2027 estimates for several other Apple product categories.
These include Mac computers, iPads and wearable devices such as the Apple Watch.
Slower hardware growth across Apple’s product portfolio could also affect the expansion of its installed user base.
That would create additional pressure on the company’s Services division.
Apple Services Growth Could Slow Sharply
Nispel expects Apple’s Services revenue growth to fall to approximately 7% in fiscal 2027.
That estimate is significantly below the current market consensus of around 12%.
Apple Services includes products such as the App Store, iCloud, Apple Music, Apple TV+ and other subscription-based offerings.
However, slower device sales could limit the number of new users entering Apple’s ecosystem. This may weaken future Services growth.
U.S. Carriers Reduce Smartphone Subsidies
Another concern is the changing strategy of U.S. mobile carriers.
KeyBanc noted that carriers are reducing device subsidies, which can make new iPhones more expensive for customers.
At the same time, consumers are keeping their smartphones for longer. This is reducing the frequency of device upgrades.
As a result, Apple may need to rely more heavily on international markets to support growth.
However, KeyBanc warned that this could become increasingly difficult if Apple continues to raise prices.
KeyBanc Says Apple Stock Looks Overvalued
Apple currently trades at approximately 24.5 times KeyBanc’s estimated fiscal 2027 enterprise value-to-EBITDA ratio.
The shares also trade at around 35 times expected earnings.
According to KeyBanc, these valuation levels are high compared with Apple’s historical averages.
The firm also argued that Apple’s valuation premium over the S&P 500 and Nasdaq is no longer justified.
Apple Faces Pressure to Meet 2027 Expectations
KeyBanc’s downgrade reflects concerns that Apple may struggle to meet current market expectations.
Slower iPhone upgrades, weaker hardware spending, reduced carrier subsidies and moderating user growth could all weigh on the company’s performance.
The firm believes investors may need to lower their forecasts for Apple’s hardware and Services businesses before the stock can justify its current valuation.
