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Apple received a rare downgrade to "Sell" from Wall Street on Tuesday.
MoffettNathanson downgraded the world's largest company from "Neutral" and set a $188 price target, representing potential downside of 22% from current levels.
According to Bloomberg data, of the more than 60 analysts covering Apple on Wall Street, only four have "sell" or sell-equivalent ratings.
Shares of Apple traded down about 1% to $242.43 in Tuesday's session.
According to senior analyst Craig Moffett, Apple, while still a "truly great company," has seen an unwarranted rise in its stock price while the news flow has been overwhelmingly negative.
"Despite the steady melt-up in Apple shares over the past few months, there has actually been a steady drumbeat of bad news," Moffett said in his downgrade note.
Some of that bad news includes a Federal judge declaring that Alphabet's $25 billion in annual payments to Apple for Google's default search position on the iPhone is illegal, ongoing weakness in China iPhone sales, and lackluster performance for the company's Vision Pro headset.
But perhaps most concerning to Moffett is the lukewarm sales of the iPhone 16, even as new AI software updates are released.
"Not only have we not seen any sign of an upgrade cycle, something that would be concerning enough on its own, but we have seen growing evidence that consumers are unmoved by AI functionality," Moffett said.
That, combined with a stock that is priced for perfection, suggests to Moffett that the current setup in Apple stock doesn't offer investors a favorable risk/reward profile.
"The outlook for Apple's shares, given this challenging backdrop, is, unfortunately, decidedly unattractive, in our view," Moffett said.
The current valuation for Apple stock is also near historical extremes and is one of the most expensive Magnificent Seven stocks, even though its growth rate has been the slowest among the cohort.
"Perhaps all this would all make sense if iPhone 16 was blowing the doors off expectations or if Apple Intelligence was credibly foreshadowing a truly massive Services opportunity. Alas, the reality is that the market has melted up and has taken Apple with it, despite the fact that many of the risks that caused us concern in August have only grown," Moffett said.
