Why Apple Stock Just Got Downgraded to Sell

Apple AAPL -1.53% stock was downgraded by a major Wall Street firm on Monday, as an analyst predicted that a radical iPhone redesign has been scrapped.

Jefferies analyst Edison Lee cut his rating on Apple to Underperform—generally graded as a moderate Sell rating—from Hold. He also slashed his price target to $263.66 from $285.56, placing it among the lowest on Wall Street.

The downgrade hinges on the suspected cancellation of Apple’s all-glass iPhone. Although the project was reported to be in development as far back as 2025 and rumored to launch as early as 2027, Apple never commented on the speculation. However, the company quietly filed a patent application for a “six-sided glass enclosure” in 2019.

While Jefferies once viewed the release of an all-glass iPhone as plausible, Lee believes development has come to a halt. According to the analyst, supply-chain checks suggest the project was canceled due to “poor production yield.” This refers to the percentage of defect-free units successfully generated during manufacturing.

Lee views the decision as “a major setback to efforts to bring in higher-priced iPhones amid soaring memory costs.” Had it launched in September 2027 to commemorate the iPhone’s 20th anniversary, the device would have carried an estimated blended retail price of $2,060—higher than the average price of any previous model.

“More importantly, we believe the plan was to extend the all-glass features to future iPhone Pro and Pro Max models, further raising their average selling price and margin,” Lee wrote. He believes an all-glass model would have been a crucial defense against soaring memory costs, warning that Apple otherwise faces lower prices for years to come.

In the same breath, the analyst provided a conservative outlook on both Apple’s AI strategy and component costs for the iPhone 19 Pro Max, which is slated for release in 2027. Other supply-chain checks suggest that Apple is considering an upgrade for the iPhone 19 Pro Max, potentially increasing its memory to 16 gigabytes from 12 gigabytes.

In Lee’s view, the slow rollout of Apple Intelligence makes it difficult for Apple to justify the expense of equipping its phones with more memory. Extra RAM is needed to run complex AI models directly on a device.

Apple shares dropped 1.5% on Monday as the tech-heavy Nasdaq Composite COMP -0.32% index fell 0.3%. Heading into the session, Apple had gained over 15% in 2026, marginally outperforming the index.

The stock’s momentum stalled last month when underwhelming fiscal third-quarter earnings triggered a selloff that erased $359 billion in market capitalization, allowing Nvidia NVDA -2.86% to overtake Apple as the world’s most valuable company.

Lee isn’t the only analyst to sour on Apple stock in recent weeks. KeyBanc analyst Brandon Nispel downgraded shares to Underweight from Sector Weight in July, arguing that Apple’s growth was beginning to stall following a boost in 2025. Sluggish iPhone sales could drag down other hardware categories, Nispel wrote, making the stock look “too expensive” over time.

Even with this recent shift in sentiment, Wall Street hasn’t lost faith in Apple. Of 51 analysts surveyed by FactSet, 32 rate the stock a Buy or the equivalent. Fourteen maintain a Hold rating, while just five—Lee and Nispel included—have issued a negative opinion on the shares.

The Apple growth and profit machine is wavering, and the boost from price increases might not be enough to keep it going at historic rates. That dials up the pressure on Apple’s new chief executive, John Ternus.

The company saved the bad news for its earnings call, an hour after it posted its results for the September quarter, projecting that for the current quarter its high-margin services business will continue to slow and that its widely watched gross profit margin will continue to fall.

Apple AAPL -1.83%decrease; down pointing triangle shares had been flat in post-close trading but declined as much as 4% after the company made the projections, which fell short of Wall Street estimates.

The impact of high memory costs are weighing even more heavily on the company, Ternus and Apple Chief Financial Officer Kevan Parekh said on the company’s earnings call. Apple has stockpiled cheaper components purchased earlier, but those inventories are dwindling.

When Ternus took over as Apple’s third chief executive of the past 29 years on Sept. 1, he inherited sky-high expectations. The men he followed were among the most successful company leaders in American business history. Steve Jobs revolutionized consumer devices multiple times. Tim Cook expanded Jobs’s creation to spectacular heights.

The expectations are reflected in Apple’s huge valuation. Oppenheimer analyst Martin Yang noted that Apple stock trades at 36 times next year’s expected earnings, a premium to the overall market, even though its earnings are only expected to grow 1%, which is slower than its tech peers.

“We see insufficient upside to justify the premium,” Yang wrote in an investor note, adding that Apple needs to boost iPhone sales growth and turn around its slowing services business to make him more bullish.

Investors have bid up Apple shares because it has been a port in the AI storm—a reliable and capital-efficient business that stands apart from rivals which are spending hundreds of billions of dollars racing to the AI frontier.

While others invest in data centers, Apple has been pouring its own cash into buybacks and dividends. But that safety may be challenged if Ternus can’t speed up Apple’s innovation engine.

Apple’s lagging performance in AI was evident when its new “Siri AI” chatbot arrived this past quarter. Its long-maligned assistant was already stale the day it arrived, surpassed by agents such as Instinct and Muse that can complete multistep tasks for consumers, while Siri still sets kitchen timers.

Apple needs to give people reasons to buy its devices as they get more expensive. The company raised prices across the board last quarter to help offset higher costs. Without compelling new features, a big question is whether consumers will slow the frequency of iPhone upgrades.

The new iPhone Duo appears to be a bright spot. Consumers are scooping up the $1,999 foldable smartphone despite mixed reviews—so many that Apple can’t keep up with demand. Shipping dates jumped out to January soon after the device went on sale, a disappointment for the normally reliable Apple supply chain.

Apple said its revenue grew 12% in the September quarter, slightly ahead of Wall Street’s expectations. Its widely tracked gross profit margin, at 47.9%, also came in just ahead of analyst estimates.

Apple will need to find new growth avenues because a reliable engine during the Cook era—the services business—is slowing. Courts and regulators worldwide have limited Apple’s ability to charge developers big fees to distribute apps through its App Store, the biggest component of the company’s services segment.

One of its most lucrative App Store fee generators has been the ChatGPT app from OpenAI. Around the time Apple accused OpenAI of trade-secret theft this past summer, OpenAI began redirecting potential subscribers to pay via its website instead of the App Store, skirting Apple’s tollbooth.

Apple’s valuation has bumped up against a ceiling in recent weeks. Six times it traded above a $5 trillion market capitalization intraday before finally closing above the threshold, which it has already fallen back below.

News Corp, owner of The Wall Street Journal, has a commercial agreement to supply news through Apple services.

Why Apple Stock Just Got Downgraded to Sell

Apple’s growth engine is showing signs of slowing, as rising costs, weaker services growth and AI competition challenge its profitability. With John Ternus taking the helm, the pressure is on to reignite innovation and sustain investor confidence.