Apple Inc. shares fell 2.3% after a Jefferies analyst said investors have overly optimistic expectations for the company’s latest iPhones, the first to come with artificial intelligence (AI) tools.
“The high expectations for iPhone 16/17 are premature,” as “a lack of material new features and limited AI coverage mean high market expectations (5%-10% unit growth) are unlikely to be met,” wrote Jefferies analyst Edison Lee, who assumed coverage of the stock with a hold rating. The firm previously had a buy rating.
Shares of Apple have rallied around 34% from their April low, with much of the gain reflecting optimism that the AI features will drive consumers to upgrade their phones, re-accelerating revenue growth. But the early signs indicate demand have been mixed.
Lee said he recognizes the long-term potential in AI, seeing Apple as “the only hardware-software integrated player that can leverage proprietary data to offer low-cost, personalized AI services.” However, he said the current valuation is “rich” and that AI won’t be a driver in the near term.
“Smartphone hardware needs rework before being capable of serious AI,” and that has a “likely timeline of 2026/27.” Wall Street is more cautious on Apple than some other big tech companies.
Just 65% of analysts recommend buying the stock, compared with ratios near or above 90% for Microsoft Corp., Nvidia Corp., and Amazon.com Inc.
Separately, Samsung Electronics Co. posted profit and revenue that fell short of market expectations, stoking uncertainty about the outlook of its pivotal chip division.
The world’s biggest maker of memory chips and smartphones reported preliminary operating profit of around 9.1 trillion won ($6.8 billion) in the September quarter versus the 11.5 trillion won projected.
Samsung shares have slid more than 20% this year as the company struggles in key markets. It’s fallen behind rival SK Hynix Inc. in memory chips used with Nvidia Corp. processors for artificial intelligence development and has shown little progress against Taiwan Semiconductor Manufacturing Co. in outsourced production of custom-made chips.
Nanofilm counts Apple as its key customer, and also the excitement over the Artificial Intelligence (AI) segment is hoped to jump-start its weak performance. With uncertainty over Apple and Samsung’s AI business prospects, we are not optimistic that Nanofilm’s fortunes can turn around so soon. This, coupled with its 50x PE, 1.6x book, and 54 cents Bloomberg consensus target price, leads us to maintain a “Reduce” call on Nanofilm.
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