As Apple (AAPL.US) is about to release earnings, more and more investors are betting that its stock price will fall. About 157 million Apple shares, or 1% of outstanding shares, were shorted as of December, the highest level since August 2020, when 2.2% of outstanding shares were shorted, according to Dow Jones Market Data. In comparison, the average short-selling ratio in the S&P 500 is 2.8%, the highest level since October 2020.
While Apple stock performed strongly last year, 2025 will be less than stellar. Apple's stock price has fallen by about 10% this year. Several factors contribute to this trend. Data released this month by research firm Canalys showed that Apple's iPhone shipments in China will decline in 2024, causing its market share to fall to third place, behind Vivo and Huawei.
On Monday, Jefferies analyst Edison Lee downgraded Apple's stock rating from "hold" to "underperform" and lowered the target price from $211.84 to $200.75. He pointed out in the research report that "concerns about weak iPhone demand have become a reality." In addition, he believes that consumers are not interested in generative artificial intelligence upgrades for smartphones, which may be detrimental to Apple's upcoming financial guidance.
Apple’s AI software “Apple Intelligence” also failed to meet the company’s expectations. This feature, announced at the Worldwide Developers Conference in June this year, was not launched in the US market until October, and its global rollout has been slow.
UBS analyst David Vogt also lowered his iPhone sales forecast in early January. They give Apple stock a "neutral" rating and a price target of $236. In the research report, analysts quoted the classic line from "Game of Thrones": "Winter is coming" to describe Apple's current predicament.
Still, Apple's stock price could rebound. If Apple's December quarter earnings report on January 30 shows strong demand, the stock price may have room to rise. However, Apple's current price-to-earnings ratio is 29.3 times its expected earnings over the next 12 months, which means that its financial performance needs to far exceed market expectations to support its high valuation.
Still, many analysts remain optimistic about Apple's future. Of 51 analysts surveyed by FactSet, 32 recommended a "buy," 14 recommended a "hold," and 5 recommended a "sell."
Wedbush analyst Dan Ives gave Apple stock an "outperform" rating and a price target of $325, which represents a 45% upside from Wednesday's closing price of $223.83. He said in the report that the market's "panic and pessimism" about Apple are overblown. "Yes, Apple's stock price is expensive by historical standards, but the 300 million iPhones that have not been upgraded in the past four years show that the company is in the early stages of a massive, multi-year upgrade cycle."
Evercore ISI analyst Amit Daryanani also rates Apple as "outperform" with a price target of $250. He wrote in a report on January 17 that he was optimistic about the upcoming financial report and expected that iPhone sales may continue to improve throughout the fiscal year. He added, "Investors' focus on iPhone 17 and SE, as well as better-than-expected performance in the Chinese market, may bring more positive sentiment to Apple."