KeyBanc downgrades Apple to underweight, target $250 after record

Apple set a new all-time high on Monday at $323.45, bringing its year-to-date gain to nearly 17%. But KeyBanc has just broken the euphoria. The bank downgraded the stock from sector weight to underweight and set a price target of $250, implying a 21% downside from Monday's close. This downgrade comes as Apple's valuation multiple reaches 35 times forward earnings, well above the S&P 500's multiple of 20.7, according to FactSet data. KeyBanc considers this level excessive given the outlook for slowing growth.

KeyBanc anticipates slowing iPhone sales and pressure on services

In a note to clients on Monday, analyst John Vinh detailed three concerns: a slowdown in iPhone builds due to price increases, low upgrade rates in the U.S., and changes in carrier subsidy models. "We see: 1) a slowdown in iPhone builds with price increases, low upgrades in the U.S., and changes in device subsidy models; 2) expectations for 2027 that likely need to be revised downward for Mac, iPad, and Wearables; and 3) user growth that will slow, weighing on services," the analyst said.

Apple currently trades at 35 times forward earnings, versus a multiple of 20.7 for the S&P 500 (FactSet data). A level deemed excessive by KeyBanc, as growth slows. The stock has surged nearly 17% year-to-date, fueled by enthusiasm for artificial intelligence, but KeyBanc believes this catalyst will not be enough to offset structural headwinds. The analyst notes that growth expectations for the Mac, iPad, and Wearables segments are too high and will need to be revised downward for 2027.

The end of U.S. carrier subsidies threatens the upgrade cycle

The core of KeyBanc's argument rests on the evolution of mobile carrier subsidies in the United States. "The three major U.S. carriers have publicly discussed their intention to move away from device subsidies," Vinh recalled. As iPhone prices rise, carriers reduce subsidies, prompting consumers to hold onto their devices longer, reducing the upgrade rate. KeyBanc believes this phenomenon is already visible in sales data: U.S. upgrades are weak and iPhone inventories are building.

This trend, opposite to what has been observed recently, will weigh on iPhone sales volumes and, by extension, on the growth of Apple's user base, the main driver of services revenue.

KeyBanc sharply cuts services growth forecasts

KeyBanc estimates that Apple's services revenue growth will slow to 7% by the end of 2027, versus a market consensus of 12%. This division, which includes the App Store, Apple Music, iCloud, and Apple Pay, has become a pillar of the group's profitability. KeyBanc justifies this forecast by the slowdown in user base growth, a direct consequence of lower iPhone sales volumes.

KeyBanc's position is isolated. According to LSEG data, of 48 analysts covering Apple, only two recommend underweighting the stock. The majority remain at buy or neutral, betting on demand related to artificial intelligence to support sales.

Positioning for the French investor

French investors exposed to Apple via ETFs such as the ETF MSCI World CW8 or thematic tech funds must factor in this correction risk. Apple represents about 6% of the MSCI World, the largest weight in the index. A 21% drop in the stock, as anticipated by KeyBanc, would mechanically impact the performance of index portfolios. Investors can also adjust their exposure via sector ETFs or direct lines in U.S. stocks. It is important to note that KeyBanc's scenario is not consensus: most analysts remain positive on Apple, buoyed by optimism around AI. However, caution is warranted, as KeyBanc's arguments rest on structural trends (end of subsidies, lengthening upgrade cycle) that could prove lasting. French investors should diversify their tech holdings and not overweight Apple in their portfolios, especially after the strong rally this year.