Apple (AAPL) stock retreated Monday after Jefferies downgraded it to hold on the view that iPhone 16 sales will disappoint despite new artificial intelligence features.

Jefferies analyst Edison Lee downgraded Apple stock to hold from buy.

“We like Apple Intelligence long-term, as AAPL is the only hardware-software integrated player that can leverage proprietary data to offer low-cost, personalized AI services,” Lee said in a report. “But smartphone hardware needs rework before being capable of serious AI, with likely timeline of 2026/2027. The high expectations for iPhone 16/17 are premature, in our view.”

Apple unveiled its iPhone 16 smartphone lineup, as well as new models of the Apple Watch and AirPods, on Sept. 9. The consumer electronics giant has branded new AI features as “Apple Intelligence.”

The centerpiece of Apple’s AI strategy is a revamped Siri digital assistant, which responds to voice and text prompts.

On the stock market today, Apple stock fell a fraction to 0.7% to 224.62 as the Nasdaq composite also retreated. Apple stock has gained 17% in 2024.

Apple Stock: Technical Ratings
Apple’s iPhone 16 smartphones officially went on sale Sept. 20. Apple Intelligence features will be added gradually through software upgrades. Most AI features will be in “beta” or test mode.

“A lack of material new features and limited AI coverage mean high market expectations (5%-10% unit growth) are unlikely to be met,” added Lee. “Our analysis suggests weaker-than-expected initial demand. We forecast flattish volume growth for second half 2024 iPhone 16 versus iPhone15, and only 2.5% growth in life cycle volume for iPhone 16.”

Meanwhile, Apple stock has an IBD Relative Strength Rating of 78 out of 99. The Relative Strength Rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks.