Investing.com -- Apple shares slipped around 1.2% in premarket trading after Oppenheimer downgraded the stock from Outperform to Perform, citing a "weaker outlook" for iPhone sales and growing competition in China.

The firm also removed its previous $250 price target, highlighting concerns about Apple’s valuation and near-term growth prospects.

Oppenheimer lowered its fiscal year 2026 earnings per share estimate by 4% to $7.95, below the consensus estimate of $8.23. The firm now expects Apple’s revenue to reach $438 billion in FY26, down from its previous forecast of $456 billion.

"Our estimate revisions are primarily driven by lower estimates for iPhone sales in FY25-26," analysts wrote, cutting expected iPhone shipment growth from 5% to 2% for FY25 and maintaining a 2% growth outlook for FY26.

A key driver of the downgrade is said to be Apple (NASDAQ: AAPL )'s declining market share in China, where iPhone shipments fell 25% in the fourth quarter and 17% for the full year 2024, according to Canalys.

"This resulted in a year-to-year market share decline from 19% to 15%," Oppenheimer noted, adding that competition from local Android manufacturers will likely limit Apple's ability to expand in the region.

The firm also expressed skepticism about Apple's ability to drive an AI-driven upgrade cycle in the near term.

"Given the gradual rollout of Apple Intelligence, lack of gen AI 'killer apps' for consumers, and rapid improvement of other gen AI models' capabilities, we expect a slower-than-expected iPhone replacement cycle leading into FY26."

With Apple trading at 29.2 times next-twelve-month earnings—well above its 10-year average of 20.4x—Oppenheimer sees "little upside" at current levels, making it difficult to justify the company’s premium valuation.