Shares of Apple (NASDAQ:AAPL) have declined today following a bearish research note from Rosenblatt Securities, which has downgraded its rating on the stock from neutral to sell. Analyst Jun Zhang maintained a price target of $150 and argued that the tech titan "will face fundamental deterioration over the next 6 to 12 months." The core iPhone business continues to struggle, and Zhang goes as far as to call last year's iPhone XS "one of the worst selling iPhone models in the history of Apple."

Here's what Apple investors need to know.

Woman using iPhone XS Max in the rain at night

image source: Apple.

No "fundamental improvements" in the iPhone business

"The reason we downgraded Apple is that with the stock price rebounding since early this year, we don't see the fundamental improvements for iPhone sales over the last couple of months," Zhang told CNBC in an interview to discuss the downgrade. "In addition, with the increase in competition and no meaningful spec upgrades for the upcoming iPhone cycle, we actually expect iPhone shipments to be down about 10% year over year in the second half of this calendar year."

The analyst also said that he doesn't expect average selling prices (ASPs) to improve, and iPhone gross margins could be pressured because several key components like NAND memory and display panels have already seen costs bottom out. "With limited upgrades for the new iPhone models in the fall and expectations of a 5G iPhone in 2020, we expect major iPhone upgrades to be pushed out to the second half of 2020," Zhang wrote in a research note to investors.

Apple has made strong progress with growing its services business, but Zhang believes that revenue growth there will soon start to decelerate, even as the company is preparing to launch several new offerings by the end of the year, including a video-streaming service called Apple TV+. iPad sales growth may also slow in the back half of the year, following several quarters of strong growth.

At the same time, Zhang does not recommend shorting Apple shares, since the company has a massive cash position that it utilizes for its enormous stock buyback program.

Waiting for 5G

The 2019 iPhones aren't expected to get any major updates, with leaks suggesting the most notable improvement will be a triple-camera system. The big upgrade that many consumers may hold out for is 5G, particularly as upgrade cycles continue to get longer and Apple's iPhone price increases only encourage users to hang on to their phones for as long as possible.

Adding 5G support to the iPhone was the impetus for the company's abrupt settlement with Qualcomm earlier this year, as it was becoming painfully clear that Intel wouldn't be able to deliver a competitive 5G modem. It was too late to get 5G into the 2019 lineup, and Apple is widely expected to add 5G next year. Until then, iPhone sales could remain sluggish.