In a recent research note, analysts at Barclays have downgraded Apple's stock to "underweight," predicting a substantial 17% decline to $160 by 2025. This bearish projection follows continued sluggish iPhone sales in China, which the analysts believe will be the driving force behind the stock's tumble.

On Tuesday, Apple's stock experienced a 3.5% drop, reacting to the pessimistic outlook put forth by Barclays. The year did not start off on a positive note for the tech giant, with the stock sliding further by 4% after being downgraded. Barclays adjusted its price target on the stock to $160, which represents a 17% decrease from the previous closing price of $192.53.

Apple's dominance in China's smartphone market has been waning, with lackluster sales data for the iPhone 15 being a significant contributing factor. Analysts, led by Tim Long, noted a lack of improvement in Macs, iPads, and wearables, further adding to the downward pressure on the stock. This downgrade marks the first time Barclays has lowered its rating on Apple since 2019.

Barclays' revision to their price target was only a slight trim from the previous target of $161. However, even this modest adjustment was enough to impact the stock negatively on the first trading day of the year. According to data compiled by Bloomberg, Apple currently holds five sell or equivalent ratings, compared to 34 buys and 14 holds.

While Barclays analysts acknowledged sluggish growth across Apple's product line, they emphasized that iPhones remain a crucial revenue driver, accounting for approximately 50% of the company's overall revenues. As iPhone sales continue to falter, Apple's quarterly growth has consistently lagged in five out of the past six quarters. Analysts expect this trend to persist, especially as the upcoming iPhone 16, set to be released in September, may not offer significant differentiation from its predecessor, the iPhone 15.

Barclays' Tim Long stated, "After a two-year period with better than trend upgrade rate, we see 2023 and 2024 as mean reversion years. Generally, a weaker macro backdrop will lead to lengthening hold times." This sentiment reflects a belief that Apple's growth may be hindered by a lack of new products in its pipeline.

Despite Apple's remarkable growth of approximately 53% in 2023, reaching a market capitalization of $3.08 trillion just a few weeks ago—surpassing all but six economies worldwide—Barclays argues that the company's limited new product offerings will impede its future prospects. Tuesday's drop in the stock price places Apple's valuation at $2.88 trillion, prompting some strategists to speculate whether Apple can become the world's first $4 trillion company.

"AAPL remains a very strong ecosystem, moving from Mac-driven to iPhone-driven over the last decade," Long explained. "We believe there is less ecosystem pull-through with new products/services, which will make growth harder over the next several years."

The downgrade by Barclays highlights the challenges Apple faces as it relies heavily on the iPhone for its revenues. As the company grapples with lower sales in China and a lack of innovative breakthroughs, investors will be closely monitoring its strategies to navigate these headwinds and sustain growth in an increasingly competitive market.