Apple Inc. (NASDAQ:AAPL) stock is so far following the typical post-iPhone reveal trend by tumbling after Wednesday’s big unveiling. The iPhone maker even picked up a downgrade from analysts at Wells Fargo, who expect its stock to remain range-bound in the near term. Overall, the general consensus on Wall Street seems to be that the iPhone 7 is good enough, although there is one major outlier predicting that the iPhone 7 will not bring a return to growth and calling for investors to sell Apple Inc. (NASDAQ:AAPL) stock.

iPhone 7 Apple AAPL
Image source: Apple

Apple (AAPL) stock downgraded to Market Perform

Wells Fargo analyst Maynard Um said in his post-reveal report that he has downgraded Apple stock from Outperform to Market Perform and cut his valuation range from $115 to $125 to a new range of $105 to $120 per share. The reason is because he expects the stock to remain range-bound for some time because the positives surrounding the iPhone 7 were as expected and quite obvious to those who look.

He believes that now that the end of the calendar year is in sight, sell-through of iPhones is becoming more important than sell-in. He notes that Apple Inc. (NASDAQ:AAPL) stock has climbed 12% since the earnings surprise on July 26, compared to the S&P 500’s 1% gain in the same time frame. Add the limited visibility to that, and he believes the risk/ reward is now balanced.

iPhone 7 to launch in more countries earlier

The analyst notes that Apple Inc. (NASDAQ:AAPL) has added more countries at launch for the iPhone 7, which could add to first weekend sales. However, this could reduce sales in future quarters. Preorders start September 9, and the phones start shipping September 16 with only eight days left in the quarter. The iPhone 7 will be available in more than twice as many countries at launch than the iPhone 6s was last year (28 versus 12), and Apple sold 13 million units in the first weekend last year.

As a result, it seems nearly a guarantee that the company will again have a record-setting first weekend, although CNBC reported that it will not release first weekend preorder sales numbers any longer. The reason is because Apple Inc. (NASDAQ:AAPL) expects supply constraints and thus expects to sell out of the iPhone 7 because of the extra countries and limited supply.

Looking out to next year’s iPhone 8, Um believes it’s just too early to invest in that cycle because there is limited visibility despite the potential for it to be a massive cycle.

Um pointed out that some people may find the iPhone 7 to be inconvenient because it no longer has a 3.5mm headphone jack. Instead, the Lightning port must be used to attach headphones, which means the phone can’t be charged while the headphones are attached.

A good enough iPhone 7?

One phrase I observed in multiple analyst reports about the iPhone 7 was “good enough,” a phrase that was also used prior to Wednesday’s event. Nomura analyst Jeffrey Kvaal referred to Wednesday’s reveal as “sufficient” and expects to see a boost in average selling price and margins as the iPhone 6 is being retired because he believes the 6 was cannibalizing the 6s. He also noted that while Apple Inc. (NASDAQ:AAPL) unveiled the AirPods and other products, they won’t be available until the holidays. He suggests that perhaps these products are late because otherwise the company might not have profiled them at the show.

BMO analyst Tim Long also called the iPhone 7 “good enough” as all was pretty much as expected. The dual-lens camera is only on the Plus model, as expected, but optical image stabilization came to the standard iPhone 7 model. As a result, he believes the iPhone 8 next year might have the dual-lens camera.

Analysts generally see the addition of water resistance as a huge attraction this year as well.

Hugely contrarian call on the iPhone 7 and Apple (AAPL) stock

BGC analyst Colin Gillis may have the lowest price target on Apple Inc. (NASDAQ:AAPL) stock on all of Wall Street at $85 per share. He also has a Sell rating on it. While most analysts are very hesitant to speak badly of the company or its precious iPhone, Gillis boldly states that he doesn’t think the iPhone 7 is good enough to bring a return to growth.

He sees two big problems with the new flagship. One is that the incremental improvements have led him to model a 5% decline in iPhone revenue for fiscal 2017, and he actually sees downside risk even to that estimate. He notes that the overall smartphone market is expected to decelerate to a 1.6% growth rate this year, according to IDC projections. He expects Apple Inc. (NASDAQ:AAPL) to lose market share over the next year.

The other is the change in storage options, which is interesting because every other analyst praised this decision. While most others expect the change in storage to boost average selling prices, Gillis believes that it will probably have a negative impact. He thinks customers who usually choose a mid or top-tier storage option might decide that the entry or mid-tier is enough. Apple Inc. (NASDAQ:AAPL) bumped up the bottom tier to 32GB and raised the top tier to 256GB. According to Gillis, the negative impact could be a drag of between $20 and $50 per iPhone, effectively deleting revenue that’s nearly pure profit.

The BGC analyst also clarified Apple Inc. (NASDAQ:AAPL) CEO Tim Cook’s comments about people switching to an iPhone from Android. Cook said on the fourth fiscal quarter earnings call that Android switchers made up 30% of iPhone buyers, which sounds impressive. However, Gillis notes that this amounts to only 6% of Android users. Further, it doesn’t account for people switching from an iPhone to Android.