Analysis: Even An iPhone Super Cycle Doesn't Make Apple Shares A Buy At These Levels

Shares of Apple Inc. AAPL were trading lower by more than 2 percent early Monday morning after a rare Wall Street downgrade.

Mizuho's Abhey Lamba downgraded Apple's stock from Buy to Neutral with a price target lowered from $160 to $150 following a meaningful outperformance since the start of 2017.

iPhone 8 Cycle

Apple's upcoming iPhone 8 cycle is expected to see strong momentum from a strong holiday season and continuing into next year, but this story is already anticipated, Lamba noted. As such, there is very limited upside to consensus estimates (242 million units shipped in fiscal 2018) — which itself may even be conservative for five reasons:

Don't Count On Other Divisions

Switching over to key international markets, China's contribution to Apple's bottom line is expected to be weak in the near-term, the analyst added. Affordability of Apple's devices is also a problem in the Indian market and this will limit any near-term contributions. Related Links: A Preview Of An Important Upcoming Event: The William Blair Growth Stock Conference Goldman Compares 'FAAMG' Stocks To High-Flyers Of The Dot-Com Bubble

1. Pull in demand creates tough comps in later years.
2. Growth is coming from iPhone users looking to upgrade their phone as opposed to net new customers.
3. Initial supply constraints coming from complexities around the product ramp.
4. Potential for demand elasticity from higher average selling prices.
5. There is also risk to out-year gross margins.

Part of Apple's growth story is based on growth in other business units and international sales.

Apple's Services segment is expected to grow 30 percent over the coming years, but this outlook may be optimistic, Lamba stated. Also, ongoing penetration of developing countries could weigh on any meaningful expansion from current levels.