Report resets price target on Apple's stock to $800 from $900, positing slower iPhone sales in saturated markets and suggesting a lower-priced iPhone could arrive in June or July.
It has been a rough few weeks for Apple investors, and so far, this week isn't looking much better.
Shares, which dropped nearly 10 percent last week alone, slid 1 percent to $527.74 in recent trading after Jefferies analyst Peter Misek cut his target price for Apple's stock to $800 from $900.
Misek said that Apple's financial results this quarter and next quarter should be well above analysts' expectations, but decelerating unit sales, price declines, and gross margin pressure should limit the stock's climb.Meanwhile, Misek expects an iPhone 5S to launch in June or July, with a new super HD camera/screen, a better battery, and NFC technology. It also could potentially have up to 128GB of flash storage, an IGZO screen for Retina+, and options for six to eight different colors, he said.
Misek also believes Apple could launch a low-cost iPhone in June or July that would about $200 to $250. However, the device hasn't gotten the green light yet, he said, and such a product would hurt gross margins.
As if those weren't enough iPhone predictions, Misek also says several iPhone 6 prototypes appear to be floating around. He noted that the model with a 4.8-inch screen, Retina+ IGZO display, new A7 quad-core processor, and no home button is the most interesting. It also could possibly have full gesture control, he said.
As for the iPad, Misek expects the iPad 5 to launch in around June with an IGZO screen, which would cut the thickness in half and significantly reduce weight. The iPad Mini also should have some "modest spec boosts" including the possibility of multiple colors and an HD display.
And the highly anticipated iTV could launch in September or October, Misek said.
Misek noted that sales of the iPhone should slow in Apple's fiscal 2014 as developed markets like the U.S. become saturated. In addition, Asian suppliers will likely lower the cost breaks they give Apple because of the amount they now have to invest for next-generation technology and because of slower and more expensive transitions to newer semiconductors.
Misek still recommended that investors buy shares but cautioned they may not rise as much as expected before because of the growth worries.
"While we returned from Asia less bullish about Apple's 2014 prospects, we believe the stock remains a Buy as expectations have been significantly reset and even a below-market multiple implies substantial upside to the current stock price," Misek noted.Apple has faced many questions over the past few months about whether its strong growth can continue. There are worries about whether it can maintain its current dominance in the mobile industry, with its iPhone and iPad both ceding market share to devices running on Google's Android operating system. At the same time, investors are fretting over the decline in profit margins at the company, which executives believe is a temporary hiccup spurred by the introduction of so many different products.
Declining margins were a concern highlighted by Misek today, as was slowing iPhone and iPad sales.
He slightly trimmed his estimates for iPhone "build plans" this quarter and for iPad plans in the calendar first quarter:
CQ4 iPhone build plans have been trimmed from 60M-65M to 60M as assembly issues remain, but this is still higher than our 53M estimate (St 46M-48M). Our checks indicate that CQ4 iPad builds have been maintained. The 60M CQ1 iPhone build plan is unchanged but iPads have been cut from 30M to 25M (JEF 20M). Flattish CQ1 iPhone builds are in contrast to recent chatter of -20% Q/Q.Updated at 10:10 a.m. PT with information about iPhone 6 and updated stock price.