Six months after downgrading Apple (AAPL +1.17%) to "neutral," Citigroup analyst Glen Yeung is feeding iBears again today. The analyst initially dropped his rating on the Mac maker on fears that iPhone 5 sales weren't as strong as hoped. Apple opened lower this morning, missing out on the broader market rally, and Yueng's latest research note could have contributed to the early weakness.
Yeung believes that even after including the prospect of an affordable iPhone, unit sales may end up being roughly flat through the end of the year. The analyst cites checks with Apple suppliers, saying that many of them expect negative revisions to Apple's build plans. There's also a risk that the iPhone 5S may see a "modest" delay, which could call into question Apple's ability to execute on its pipeline.
It might not be all bad, though, as Yeung also sees signs that the rumored iWatch could be nearing production. The analyst thinks it is "increasingly likely" that the wearable device could be released later this year, while the iTV may still have to wait.
Overall, Citi is sticking by its price target of $430, even after acknowledging the dirt-cheap valuation that Apple now trades at. Thus far, Citi's downgrade has been well timed, although at times Yeung's skepticism has been a little overdone. For instance, amid China's anti-Apple campaign earlier this year, Yeung estimated that Apple could end up taking a massive hit in revenue to the tune of $13 billion.
He came up with that figure by making a very broad comparison to Hewlett-Packard, who was also the target of a similar campaign years ago that resulted in HP losing half of its market share in China. Local PC makers gobbled up HP's share, but the big difference there is that PCs are highly commoditized, whereas Apple is a differentiated player.
Yeung may have reservations about the second half of 2013 for Apple, but investors will have a better idea of what the company has up its sleeve when it kicks off WWDC next week.
