"Our bullish thesis on Apple had been predicated on the expectation for gross margin expansion driven by the 5s cycle," says analyst Maynard Um, cutting Apple (AAPL) to Hold with the price target remaining in the $536-$581 range. "While we still have conviction in the gross margin thesis (and the potential for iPad/iPhone unit upside), we believe this may be largely embedded into the valuation."
Along with margins, Um is also concerned about limited market opportunity in Apple's existing product lines, and a shift in the balance of power from handset vendors back to wireless providers.
Shooting back, Jay Yarow says he believes Apple has long-term contracts with carriers, and what's commonly known as a "subsidy" to entice buyers to purchase iPhones is really a loan that is paid back as part of the monthly service cost.
Um isn't all negative, seeing positive 2014 catalysts like the iPhone 6, the iBeacon, the iWatch, and the chance for boosted capital returns.
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