Citi Removes Apple From U.S. Focus List, Lowers iPhone Sales Estimates

• Apple Inc. (NASDAQ: AAPL) shares have declined 10.2 percent over the past six months, from a high of $321.65 on April 27.
• Citi’s Jim Suva has reiterated a Buy rating on the company, with a price target of $145.
• Suva has removed Apple from Citi’s U.S. Focus List due to “near term conviction in other stocks.”

Analyst Jim Suva mentioned that the company is scheduled to report its 4Q15 results on October 27. The iPhone unit sales estimate for the quarter has been lowered, and Suva expects other analysts to do the same prior to October 27.

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The stock is expected to continue to be volatile in the near term and Suva believes that “Apple’s investment thesis will shift from a iPhone "beat and raise" investment story to a gross margin upside story.”

Suva expects the company to return to transition from a tough comp year for iPhone 6S before it can return to unit growth with iPhone 7.

According to the Citi report, Apple’s gross margins are likely to act as a positive catalyst for the stock. The production bottlenecks witnessed in 2014, associated with the case and screen, are expected to give way to high yields for new models.

“We believe tough comps and limited potential sales/EPS upside in the near term may cause some investors to exit the stock thereby providing an attractive entry for long term investors,” the report added.