Apple's China problems keep weighing on the stock
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- Two sets of analysts downgraded Apple, citing weak iPhone demand.
- Apple's AI-powered iPhone 16 has had mixed reviews; its biggest feature is unavailable in China.
- Chinese smartphone makers like Xiaomi are gaining market share over Apple in the key region.
Wall Street's confidence in Apple's China performance seems to be slipping as its first-quarter fiscal year 2025 earnings announcement approaches.
Apple, which is scheduled to report quarterly data on January 30, was downgraded to "underperform" by analysts at Jefferies. It was also cut to "hold" from "buy" at Loop Capital, Bloomberg reported.
Shares have fallen more than 10% in 2025, and dropped more than 3% on Tuesday.
In a note published Monday, Jefferies analyst Edison Lee cited weak iPhone demand, particularly in the key Greater China region. Jefferies estimates a 4% drop year over year in iPhone shipments in the first quarter. Meantime, Loop cited ongoing iPhone sales weakness, Bloomberg said.
Apple released its highly anticipated Apple Intelligence features in October 2024 after announcing the AI software at the Worldwide Developers Conference earlier that year. At the time, Wedbush analyst Dan Ives said it could drive a "golden" upgrade cycle.
However, "AI would be unlikely to kickstart a super upgrade cycle anytime soon," Jefferies' Lee said.
Since the AI-powered iPhone 16 launched in September, it's been met with mixed reviews in the US. Apple Intelligence is also not yet available in China. MoffettNathanson also gave Apple a rare "sell" recommendation this month.
Apple's standing in China has been rocky this past year, with local smartphone makers gaining ground in a crucial market for the tech giant. Chinese competitor Xiaomi grew handset sales the fastest in 2024, according to data from Counterpoint.
Apple was late to launching its AI offerings compared to its tech competitors, but it seemed to invigorate Wall Street with demonstrations of Apple Intelligence at WWDC. Citi analysts said it was the "best WWDC" in a long time.
However, they're still waiting for the Apple Intelligence rollout to move the dial for iPhone sales.
"Any delay in advanced packaging roadmap would be a further negative sign," Jefferies' Lee said.