Jim Cramer: Ignore Apple Downgrade, Stock Has Upside

Last week’s surprising downgrade from Jefferies, which shifted Apple stock to underperform and slightly reduced its price target, stands in direct opposition to Jim Cramer’s bullish perspective. The financial commentator has been vocal in his disagreement, explicitly telling investors “not to listen” to the downgrade. This divergence in opinion highlights the ongoing debate surrounding Apple’s valuation and future prospects, particularly as the company has underperformed relative to its Magnificent Seven peers despite trading around $256 per share.

Jefferies’ analysis suggests that the recent demand surge for the iPhone 17 stems more from competitive pricing than genuine innovation, while also expressing skepticism about future iPhone releases including the highly anticipated foldable model expected next year. However, Cramer and the author contend that this downgrade lacks substantial new material and fails to account for Apple’s strategic positioning in the evolving AI landscape and its potential for significant product innovation.

Despite Jefferies’ characterization of iPhone 17 demand as price-driven rather than innovation-led, the device’s release generated stronger-than-expected consumer interest. The author notes that while the iPhone 17 keynote failed to deliver game-changing features that “blew away” audiences, practical innovations including the vapor chamber technology, thermally-efficient aluminum design, competitive pricing, and new color options proved sufficient to convince many Apple fans to upgrade their aging devices.

The fact that demand exceeded expectations for what many considered an iterative update suggests that even modest improvements can drive significant consumer response within Apple’s ecosystem. This pattern bodes well for future releases that might incorporate more substantial innovations. The author speculates that if incremental changes can generate such response, “a more profound innovation could be even more of a needle mover” with potential “super-cycle” characteristics.

While Jefferies expresses lower expectations for Apple’s foldable iPhone, the author argues it’s premature to judge the device’s potential. Historically, foldable phones have occupied a niche market, but Apple’s track record of reinventing product categories suggests the company could transform the foldable segment. The author specifically references “iPhone Air innovations” that “seem to point to a game-changing foldable,” indicating that Apple’s approach might differ significantly from current market offerings.

Beyond hardware, Apple’s software innovations represent another potential growth driver. The upcoming Siri upgrade and AI search project Veritas could help the stock command more of an AI premium, which the author believes is currently underrepresented in Apple’s valuation. Unlike competitors such as Nvidia, which recently announced plans to invest $100 billion in OpenAI, Apple appears content to develop its AI capabilities internally rather than pursuing potentially overpriced acquisitions.

The author notes that while Nvidia’s massive OpenAI investment has excited investors, it comes at “quite a lofty price for its ticket into the AI juggernaut.” Apple’s strategy of innovating without relying on deals that “may entail a hefty markup” or “too rich a premium” reflects the company’s characteristic approach of controlling its technology stack and avoiding trends that don’t align with its long-term vision.

As one of the lagging members of the Magnificent Seven, Apple stock has “pretty much stood pat” while peers rose during the AI boom. However, this underperformance might create opportunity for investors if upcoming innovations deliver on their potential. The author sides with Cramer’s assessment that other Apple products, like Vision Pro, are “rich in innovation” and could become sources of positive surprise for the company.

The fundamental disagreement between Jefferies and Cramer centers on timing and conviction in Apple’s innovation pipeline. If Jefferies analysts are proven wrong about their expectations for the foldable iPhone and Apple’s AI initiatives, they “can always upgrade the stock later on,” but investors who follow their downgrade might miss buying opportunities at current levels and potentially need to “buy back at higher prices, perhaps much higher prices.”

Ultimately, the author concludes that Cramer’s advice to ignore the Jefferies downgrade and focus on Apple’s long-term horizon represents the smarter approach. Between the analyst skepticism and Cramer’s bullish perspective, the author explicitly states: “I’m siding with Jim when it comes to Apple,” emphasizing confidence in Apple’s ability to innovate and capture value from its upcoming product and AI developments.