Needham Downgrades Apple (AAPL), Flags $170–$180 as Attractive Entry Level

On Wednesday, Needham analyst Laura Martin downgraded Apple Inc. (NASDAQ:AAPL) to Hold from Buy without assigning any price target. She cited multiple headwinds that could weigh on the company’s near-term growth and valuation.

Martin points to a combination of slowing iPhone demand, rising competitive pressure, and a premium valuation as the main factors behind the cautious stance. She believes these factors could lead to pressure on revenue and earnings growth in future quarters.

A busy sidewalk filled with people using Apple devices like iPhones, iPads and Apple Watches.

Specifically, she sees limited potential for an iPhone replacement cycle within the next 12 months, one of the key catalysts that could drive upside in the stock. Without that, she believes the current valuation, at more than 26 times forward price-to-earnings (P/E), looks stretched relative to its peers. Martin also notes that Apple’s relatively expensive valuation becomes even more concerning when considering the company’s slower revenue and margin growth compared to its large-cap tech peers.

Apple’s AI Strategy and Innovation Risks Are Under Scrutiny

Apple’s position in the AI market has also raised concerns, as competitors push forward in generative AI while Apple appears to be falling behind. Its recently introduced offerings, such as Apple Intelligence and Siri virtual assistant, have fallen behind expectations which raised concerns on the company’s execution. In addition, the recent acquisition of AI startup “io” by OpenAI, co-founded by former Apple design chief Jony Ive, highlights the shifting innovation dynamic.

Martin warns that AI-led advancements could usher in new hardware platforms that challenge Apple’s iOS ecosystem. In addition, Apple’s high-margin platform revenues are facing pressure, with competitors increasingly targeting the company’s 15% to 30% App Store fees.

Martin also notes that while Apple could unlock upside by aggressively expanding into advertising, that opportunity remains largely untapped for now. Until a clearer catalyst emerges, she views the $170–$180 range as a more favorable entry point. In the current environment, the analyst prefers Alphabet Inc. (NASDAQ:GOOGL) and Amazon.com Inc. (NASDAQ:AMZN), citing their stronger growth profiles.

Blomberg points out that the downgrade comes amid increasing investor caution toward Apple, with its shares down 19% year-to-date, making it the weakest performer among the “Magnificent Seven”. Beyond its AI issues, political uncertainty, including the impact of tariffs due to its global manufacturing footprint, has weighed on the share price.

Needham joins a growing list of firms, including Jefferies, Rosenblatt Securities, and Oppenheimer, that have lowered their ratings on Apple over the past few months. Notably, fewer than 60% of analysts tracked by Bloomberg currently rate the stock a Buy, one of the lowest buy ratios among the mega-cap tech names (most of those have buy ratios near or above 90%).

Apple Inc. (NASDAQ:AAPL) designs, manufactures, and markets innovative consumer products, including the iPhone, iPad, Mac computers, Apple Watch, and Apple TV. The company also offers a range of software and services, such as the iOS and macOS operating systems, iCloud, advertising, payment services, Apple Music, and the App Store.

While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than AAPL and that has 100x upside potential, check out our report about the cheapest AI stock.

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Disclosure: None.