Citi On Apple: Despite Near-Term Pressure, iPhone 7 Should Be The Focus

The market digested lukewarm results from Apple Inc. (NASDAQ: AAPL) that showed first year-over-year sales decline for the tech behemoth since 2003.

However, Jim Suva of Citi is positive on the iPhone maker saying investors should focus on the iPhone 7 launch in September. Suva maintained his Buy rating, but cut the price target on the stock to $115 from $130.

"Apple can return to sequential growth in the September and December quarters (y/y growth in FY17) and importantly expectations remains low in 2H 2016 and also 2017," Suva wrote.

Related Link: Oppenheimer: Apple Downgraded, Analysts 'Questioning' Their Faith

Suva believes investors would soon look beyond this near-term weakness and focus on the iPhone 7 launch, along with opportunities in large markets such as India and "newer markets including enterprise and services that will allow grow its installed base."

However, the analyst acknowledged there would be near-term pressure on the shares in the next few months as Apple is expected to reduce its channel inventory over 3 million iPhone units during the seasonally slow summer and ahead of iPhone 7 launch.

This is a negative read-through for the Jabil Circuit, Inc. (NYSE: JBL), as Jabil makes the case for iPhones and accounts for 24 percent of Jabil's total company sales and "more than that for Jabil's profitability."

"We believe the actions by Apple to reduce channel inventory by $2+ billion (over 3 million iPhone units) is supportive of our Sell rating on Jabil shares," Suva noted.