Apple Inc. (NASDAQ:AAPL) delivered some great earnings results yesterday afternoon after the market closed. The only real negative contained in the report was the company’s gross margin guidance for the fourth quarter, which came in at the lower range of market expectations. But a new report on the earnings from Citigroup analyst Glen Yeung shows another possible negative for Apple investors.

Apple

According to Yeung, Apple Inc. (NASDAQ:AAPL) may be vulnerable to downside risk in the March quarter. Apple is likely to see a record-breaking first quarter of the year, a period which covers the holiday season, but the company’s second quarter may be more difficult than expected. Yeung puts a price target of $530 on Apple’s shares.

Apple second quarter doubt

According to Yeung, Apple Inc. (NASDAQ:AAPL) is going to be affected by new trends in smartphone upgrade cycles. He believes the company faces a substantial risk of a drop-off in smartphone sales a couple of quarters after it releases new products. Yeung reckons that the media frenzy around the release of a new iPhone draws forward demand from the rest of the year.

That means that Apple Inc. (NASDAQ:AAPL) may see less than incredible iPhone sales once the new smartphone has been around for half a year. Yeung is looking for iPhone shipments of 38.3 million in the second quarter, down from a previous estimation of 40.1 million.

In Yeung’s view, the massive iPhone sales at launch and the large sales bound to be recorded in the first quarter of the year, will likely pull sales from the second quarter of the year. If he’s correct, there may be a pullback on the company’s shares after those results emerge.

Apple guidance

Yeung raised his price target after this earnings report to $530 from his previous target of $430 and rates the stock at Neutral. He says that in previous reports, the effects of Carl Icahn’s campaign to see Apple Inc. (NASDAQ:AAPL) increase its buyback and the effects of the product launch were not properly accounted for.

Yeung has an unusual take on Apple Inc. (NASDAQ:AAPL)’s iPhone sales, and many of the company’s investors will not be ready to agree with his less than optimistic take. Apple Inc. (NASDAQ:AAPL) performed well in the fourth quarter of 2013, but 2014 may offer new challenges.

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