Jefferies Cuts Apple to Underperform, Cites Cancellation of All-Glass iPhone Plan

Apple Inc. has faced a setback as Jefferies downgraded the stock from hold to underperform, trimming its price target to $263.66-a nearly 16% drop from the last close. The move comes after the investment firm's supply chain checks indicated that a key product innovation, a planned all-glass iPhone expected to launch next year, has been scrapped due to yield problems.

The anticipated all-glass model was intended to boost Apple's average selling price and margins, particularly by extending this feature to future Pro and Pro Max versions. Jefferies analyst Edison Lee described the cancellation as a major hurdle in achieving higher-priced iPhones, especially since rising memory costs are already putting pressure on product pricing.

Adjusting its forecast, Jefferies lowered Apple's projected fiscal 2028 earnings per share by 2.1%, underscoring the challenges in introducing new iPhone designs. The difficulty in rolling out fresh form factors raises questions about the company's ability to sustain growth through premium models.

Apple's foldable iPhone, scheduled for release in September 2026, now stands as the only near-term driver to potentially lift average selling prices and margins. However, escalating memory prices, driven by the proliferation of AI, could push that device's starting cost beyond $2,000, potentially limiting its market appeal.

Despite this, Apple shares showed only a modest decline of over 1% in early trading on Monday. The stock continues to outperform year-to-date, appreciating around 15%. This contrasts with Jefferies' bearish stance and is at odds with Wall Street's broader sentiment, where the majority of analysts maintain a buy or strong buy rating on the stock.

With only three analysts out of 47 recommending an underperform rating, Jefferies' perspective underscores a more cautious take on Apple's near-future product prospects and pricing power. Meanwhile, uncertainties around innovation pipeline and cost pressures will remain key observations points going forward.

The cancellation of the 20th anniversary all-glass iPhone itself could signal trouble for Apple's plan to keep pushing the envelope on design to justify premium pricing. Without the physical novelty, maintaining momentum in a highly competitive smartphone market could prove challenging.

As the market digests these developments, all eyes might turn to the foldable iPhone's fate later next year. Will it deliver a groundbreaking experience that justifies its steep price, or will it end up as an expensive niche product? For now, Apple's premium push hits a roadblock.