KeyBanc Downgrades Apple to Underweight on Slowing Hardware Demand

KeyBanc Capital Markets downgraded Apple Inc. (AAPL) to Underweight from Sector Weight on Tuesday, establishing a price target of $250 per share. The firm's decision is rooted in evidence of weakening hardware demand and concerns that growth expectations for 2027 are overly optimistic.

Weakening Demand Signals

In a note to clients, analyst Brandon Nispel pointed to KeyBanc's proprietary spending data, which showed a 2% month-over-month decline in indexed spending for June. This figure contrasts sharply with the three-year average of 9% growth for the same period, marking another month of below-trend performance.

The firm interprets this data as a sign that Apple's U.S. growth is beginning to normalize. KeyBanc suggested this follows a period of accelerated sales last year, which it described as a "tariff-related demand pull-in."

Growth Headwinds and Valuation

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KeyBanc outlined several key risks to Apple's future performance, arguing that consensus estimates for 2027 are too high. The firm highlighted concerns including:

• Slowing iPhone production builds amid potential price increases.
• Weak upgrade cycles in the U.S. and changing device subsidy models from carriers.
• A potential slowdown in user base growth, which could in turn pressure the high-margin Services division.

Nispel projects that Apple's Services revenue growth will decelerate to 7% in fiscal 2027, significantly below the current Wall Street consensus of approximately 12%. The note also called consensus iPhone growth estimates of 8% for 2027 "too aggressive," stating that international markets will struggle to offset slowing U.S. demand in a rising price environment.

From a valuation perspective, KeyBanc argued the stock is overvalued relative to its history. The firm noted that Apple trades at approximately 35 times its price-to-earnings estimate and called its current premium to the S&P 500 and Nasdaq "unwarranted."