A single product decision was enough for the investment bank to downgrade its rating: the anniversary iPhone will come without a glass casing. Four weeks earlier, the situation in the supply chain sounded completely different.
Price target reductions are not uncommon for Apple stock these days; several firms have adjusted their ratings after the quarterly results, including JP Morgan with a target of $340. However, a downgrade to the lowest recommendation level is unusual – and the reason hinges on a device that Apple isn't expected to unveil until 2027.
Jefferies downgraded its rating on Jefferies from "Hold" to "Underperform" on Monday and lowered its price target from $285.56 to $263.66. Compared to Friday's closing price of $313.33, this represents a downside potential of approximately 16 percent. Analyst Edison Lee explained the move in a CNBC report, citing supply chain audits.
Key Facts at a Glance
- Jefferies downgrades Apple from Hold to Underperform and lowers its price target to $263.66.
- The reason is the assumption that Apple scrapped the glass casing for the iPhone 20 due to poor manufacturing yields.
- This eliminates the most important lever for higher selling prices; profit estimates for 2028 and 2029 have been lowered.
- The foldable iPhone will remain the only price driver in the short term, but at over $2,000 it is likely to be a niche product.
- Our own report from July 14th described the production for the glass design as ready to start.
What Jefferies says is wrong about the anniversary model
The anniversary model, expected in September 2027, was long considered the device with which Apple could shift the price structure of the iPhone line upwards. A casing made largely of glass would have been a visible break with the previous design language.
Lee writes that this project was scrapped due to insufficient yield. The plan had been to subsequently extend the design to the Pro and Pro Max models, thereby increasing their average price and profit margin. According to his interpretation, this incident demonstrates that new form factors are proving more difficult to implement for the iPhone than anticipated.
As a result, Jefferies lowered its expected growth rate for the average iPhone selling price through 2031 and its earnings per share estimates for fiscal years 2028 and 2029 by approximately two and three percent, respectively.
A finding that contradicts the previous picture
On July 14th, we reported that production for the glass design was apparently ready. Four weeks later, the same project is said to have failed due to insufficient yield.
Both statements come from supplier sources, both are unconfirmed, and neither can currently be used to argue against the other. The fact that they contradict each other is the real issue – not which side is right.
Furthermore, glass manufacturing is largely based in the USA and therefore less transparent than Asian supply chains. A finalized case design also doesn't need to be completed a year and a half before the market launch. Based on the current overview of reports about the iPhone 20, it already suggests a device more along the lines of the iPhone Air than a purely glass casing.
The foldable iPhone as the remaining lever
In Lee's estimation, only one model remains capable of raising the average price in the short term: the iPhone Ultra, Apple's first foldable iPhone, expected in September. However, with a starting price exceeding $2,000, he considers it a niche product with limited production volumes.
This concern coincides with an already strained cost situation. The material costs of the upcoming Pro generation are estimated to be 38 percent higher than those of its predecessor, driven by the price of memory.
Another point from the report directly concerns the European market: Lee points to increased trade-in values in the US and Europe. These could lead to purchases being brought forward in the current iPhone 17 cycle, thereby dampening demand for the iPhone 18 generation.
How lonely the position is
The downgrade runs counter to the prevailing sentiment on Wall Street. Of the 47 firms that cover Apple, the ratings are distributed as follows, according to a list obtained by CNBC:
| Classification | Number of houses |
|---|---|
| Strong Buy | 10 |
| Buy | 20 |
| Hold | 14 |
| Underperform | 3 |
| Sell | 0 |
However, the figures differ. Another analysis identifies six properties with a recommendation similar to a sale and considers this the highest level since 2012. The discrepancy likely stems from differing data collection methods – it remains unresolved, and both figures are circulating simultaneously.
The highest price target in the field is $400, the average is $319.48. Jefferies is therefore about $56 below the consensus.
What remains of the downgrading
A downgrade isn't news about Apple itself, but rather about a company's expectations of Apple. The verifiable core is limited to the numbers: new rating, new price target, lowered earnings estimates. Everything else is based on supply chain audits that can neither be confirmed nor refuted.
We expect the question of the glass casing to go back and forth several times in the coming months. Two conflicting reports within four weeks are more the rule than the exception for a device that's still over a year away – Apple has until spring of the launch year to finalize a casing design.
For readers intending to buy, this news changes nothing about the devices currently available in stores. However, anyone who was waiting for Apple to unveil something fundamentally new in 2027 should put their expectations of a glass casing on hold for now. Nothing has been confirmed at this point – neither the original plan nor its alleged cancellation. (Image: Apple)
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