Jefferies became the latest Wall Street firm to lower expectations for Apple's stock on weakness in the iPhone supply chain.
"It could get worse before it gets better," Jefferies analyst Timothy O'Shea said in a note Wednesday. "It appears that [Wall Street] estimates may still be too high."
O'Shea's firm lowered its 2019 estimates for iPhone revenue by 3 percent and for Apple's profit by 4 percent. Jefferies now expects Apple to sell about 72 million iPhones in the first quarter next year and 206 million iPhones over the full year. That is below Wall Street's expectation for iPhones sales 74 million and 210 million in the respective periods.
Apple shares rose fractionally in premarket trading from Tuesday's close of $166.07 a share. Jefferies slashed its Apple price target to $225 a share from $265. Despite the cut, Jefferies remains largely positive on the stock due to expected growth in the tech giant's services business.
"Apple's iPhone business still looks sufficient to build a massive, high margin, high multiple Services business over time," O'Shea said. "Apple will disclose gross margin of Services for the first time ever next earnings."