Apple shares slipped more than 2% in pre-market trading Tuesday, after Barclays downgraded the stock to underweight and slightly trimmed its price target from $161 to $160.

Barclays analyst Tim Long wrote in a note to clients Tuesday that the iPhone 15’s currently “lackluster” sales, specifically in China, presaged similarly weak iPhone 16 sales — weakness that Long expects will hold true for Apple’s hardware sales broadly.

“We are still picking up weakness on iPhone volumes and mix, as well as a lack of bounce-back in Macs, iPads and wearables,” Long wrote. Analysts and investors had noted specific weakness in China iPhone sales as far back as October.

Bloomberg has previously reported that the Chinese government has issued informal guidance forbidding state employees from using iPhones. The Chinese government has denied issuing such guidance.

Long expects that Apple’s lucrative services business will also see decelerated growth, in part due to regulatory scrutiny. Gross margin in Apple’s services businesses is roughly double the margin Apple makes on all its hardware products, and Apple CEO Tim Cook highlighted “better-than-expected” growth in that unit on an earlier investor call.

But Barclays doesn’t necessarily believe that growth is reliable in the long term.

“In 2024, we should get an initial determination on the Google TAC, and some app store investigations could intensify,” Long wrote, referring to the payments Google makes to Apple to retain its default search status.

Google CEO Sundar Pichai previously confirmed that the company pays 36% of its Safari search revenue to Apple. Regulators have been scrutinizing the default search status and both Apple and Google themselves.

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