Apple's Q3 financial report is coming soon, but KeyBanc Capital Markets is pouring cold water: Apple's growth expectations may be too optimistic.

The analyst Brandon Nispel from the institution has downgraded Apple's rating to shareholding, believing that the market's expectation of a major turning point in Apple's business is too aggressive.

Nispel believes that the assumption of Apple achieving the highest growth in over three years and reaching a turning point in its business is "not realistic." This is the first downgrade in rating by KeyBanc since tracking Apple three years ago.

"Apple is an impressive company, we believe it holds unrealistic fantasies for growth in all product categories and regions."

According to Bloomberg's data, the stock currently has 39 buy ratings, 18 hold ratings, and 3 sell ratings. Nispel's newly set target price is $200, one of the lowest among Wall Street analysts.

As of the time of publication, Apple rose by 0.68%, trading at $232.13 per share.

Apple may have difficulty achieving overall growth, as the iPhone SE may cannibalize iPhone 16 sales.

As the earnings season for the 'big seven' companies begins, Tesla's outstanding performance has set the stage. Apple is expected to release its financial report on October 31, with iPhone sales expected to grow after two quarters of decline.

Data from Counterpoint Research shows promising signs for the iPhone 16s, with a 20% increase in sales in the first three weeks of its release in China compared to the 2023 model.

Despite market expectations for accelerated revenue growth across various products and regions for Apple next year, Nispel remains cautious about this.

He pointed out that historical data shows that Apple has achieved synchronized growth across all product lines only once in the past 10 years, and only twice in the past 20 years. In terms of regions, Apple has only achieved comprehensive growth in five regions three times in the past 10 years.

"Although Apple may achieve this feat, we believe it is unlikely."

In addition, Apple is about to produce an updated version of the iPhone SE, hoping this revision will help it compete in the lower-end smart phone market. However, Nispel warns that this update may not result in a net increase in iPhone 16 sales.

He cited a consumer survey conducted by KeyBanc, which found that while respondents have a strong intention to upgrade to the iPhone 16, their interest in the iPhone SE is equally high.

We believe investors are overly optimistic about the sales volume of the iPhone SE, as our research indicates it has more cannibalization.

Considering Apple's market cap is far above historical levels, peers, and the broader market, we believe the stock may underperform and would need a significant outperformance to rise, which we do not believe will happen.

Editor/rice