Apple shares have fallen far enough, Citi says

Citi prefers to be optimistic when it comes to Apple.

It's not really alone in this (as the firm notes, 51 out of 56 analysts recommend investors buy Apple shares), but what is different is the optimism comes after a rough patch for Apple's stock.

Apple shares have dropped pretty badly over the past couple of months -- down about 18 percent from a high of $705.07 in September -- but that decline is likely about over, Citi says.

The firm today started coverage on the electronics giant by recommending investors buy shares and saying the stock should reach $675 over the next 12 months. It notes that Apple shares typically climb 20 percent to 50 percent following sell-offs similar to the most recent drop.

Citi's opinion about Apple isn't much different from other analyst firms. It believes the giant's share of the smartphone market is at risk from low-end smartphones and competition from other ecosystems. It expects tablets to grow, but that will hurt margins.

It also notes new competition is pressuring pricing, accelerates product introduction, and can hurt branding.

"Room for error is diminished, placing growing emphasis on execution," the firm noted.

All of those factors are making investors a little cautious, Citi said, and that likely will prevent shares from jumping as high as they have been. As a result, the firm says it is focusing on "incremental earnings changes," investing in periods of the greatest possible jump in earnings and selling shares when estimates show the greatest risk.

"This is tantamount to investing in 'product cycles,' and while we expect some investors will bristle at this approach, we believe returns will be optimized employing this approach in future," Citi said.