MoffettNathanson analysts downgraded Apple (NASDAQ:AAPL) to Sell from Neutral, setting a price target of $188, reduced from $202. The decision reflects concerns over the company’s valuation and lackluster consumer response to its initial AI features.
The downgrade is rooted in a multi-year discounted cash flow analysis using an 8.0% weighted average cost of capital and a 4.0% terminal growth rate, adjusted downward by 50 basis points from prior estimates. This approach results in a 19.5x EV/EBITDA terminal multiple, highlighting Apple’s steep valuation relative to its growth prospects.
A key issue is the tepid reception to Apple’s first AI-driven features, which has failed to ignite the anticipated upgrade cycle. This lack of enthusiasm mirrors broader consumer indifference toward AI functionality across the industry, further dampening expectations. Additionally, advancements in fully agentic AI—critical to Apple’s long-term bullish case—appear more distant now than earlier this year.
While Apple remains a standout in terms of product innovation, exceptional management, and a capital-efficient AI strategy, its share price reflects overly optimistic assumptions, according to the analysts. Despite having the lowest growth rate among the tech sector’s elite “Mag Seven,” Apple commands the highest valuation multiple. This disconnect between growth and valuation makes the stock’s outlook increasingly unattractive in the current environment.