Apple Inc. (NASDAQ:AAPL) is entering a period of considerable uncertainty as it approaches its fiscal third-quarter earnings report. Research firm MoffettNathanson has maintained a Sell rating on the stock with a price target of $139, pointing to a variety of unresolved challenges including tariffs, pricing strategies in China, regulatory impacts, and questions around Apple’s artificial intelligence approach.
MoffettNathanson explained that in the U.S., there appears to have been a pull-forward effect in demand ahead of expected price increases tied to tariffs. “In the U.S., it appears that our anticipation of a pull-forward of demand to beat potential price increases on Apple products in response to tariffs has been borne out,” the firm noted, highlighting that iPhone unit sales in April and May showed double-digit growth compared to the previous year. However, this increase in volume may not translate to higher revenue because of declining average selling prices.
Regarding China, the firm observed a sharp rise in iPhone sales in May but warned that average selling prices “appear to have been cut dramatically.” This was attributed to Apple discounting its Pro models to match local government subsidies, a tactic likely contributing to an advance in consumer demand.
Another area of uncertainty centers on Apple’s Services segment. MoffettNathanson raised questions about the impact of recent legal rulings: “It will reflect a month and a half or so of impacts from the Epic Games ruling… Will those impacts show up in the numbers, or is it still too early to say?”
Most notably, the firm expressed concerns about Apple’s stance on artificial intelligence. MoffettNathanson described Apple as still being “rudderless in AI” and speculated that the company might consider “buying an answer” to address its perceived deficiencies. This adds further complexity to Apple’s near-term outlook.
Highlighting the risk environment, MoffettNathanson stated, “With the asymmetry of the risks, we’d argue for lower estimates.” The firm added, “To date, the market has supplied little of either,” implying that downside risks are not yet fully priced into the stock.
Concluding its assessment, MoffettNathanson warned, “Greater uncertainty ought to mean lower multiples,” emphasizing the possibility of downside pressure on Apple’s stock ahead of earnings.