Analysts divided on Apple: Cantor calls it a 'top pick,' Wells Fargo downgrades citing margins

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A pair of Wall Street analysts have come to very different conclusions on Apple stock for the start of 2014, as Brian White of Cantor Fitzgerald gave an enthusiastic recommendation for the iPhone maker, while Maynard Um of Wells Fargo downgraded AAPL shares from "outperform" to the status of "market perform."

Both firms issued research notes to investors on Thursday stating their cases as to why investors should or shouldn't be excited about the prospects for Apple has the new year begins. White, of Cantor Fitzgerald, declared that Apple is his firm's top large-cap pick for 2014, declaring that he believes the next 12 months will be a "year of innovation" for the Cupertino-based corporation.

"For 2014, we expect Apple to enter new product categories, re-accelerate growth in China and deepen its offerings in existing categories," White wrote in a note provided to AppleInsider.Brian White of Cantor Fitzgerald believes 2014 will be a "year of innovation" for Apple.

Specifically, he expects Apple to release a wrist-worn so-called "iWatch" this calendar year, while he also predicts that Apple will launch new, larger iPhone models in 2014. He also believes that recent rumors of a 12.9-inch iPad are not really for a new iPad, but instead a "hybrid device" that would be bigger than an iPad but more mobile than a MacBook Air.

Finally, White is also bullish on Apple's newly announced China Mobile deal, which will see the world's largest carrier begin selling both the iPhone 5s and iPhone 5c this month. Cantor Fitzgerald has maintained its price target of $777 for Apple stock.

While White sees numerous reasons to buy shares of AAPL, Um of Wells Fargo is less confident. On Tuesday, he downgraded the iPhone maker's stock to "market perform," though he maintained his price target range of between $536 and $581 —  as of Thursday morning before the markets opened, shares of AAPL were in the middle of that range at $561.

The reason for Um's downgrade is concerns over Apple's gross margins. In particular, he expects that Apple will launch a redesigned "iPhone 6" later this year that will cut into profitability, as has occurred in every new iPhone form factor cycle previously.

iPhone 5s

In addition, he believes there's a "limited amount of incremental market cap opportunity in the existing product segments Apple plays in." He believes Apple's recent market capitalization gains did not come from increased consumer spending, but instead represented the "transfer of dollars" from competitors.

"With less market cap to absorb from its peers and continued pressures on the consumer wallet, we see limited market opportunity absent material share gains," Um said.

The last concern expressed by Um as Apple heads into 2014 is a prediction by the analyst that smartphone subsidies may become less of a focus for wireless providers. AT&T's CEO hinted as much last month, when he said carriers should push toward an ecosystem devoid of subsidies for high-end smartphones.

Um believes that carriers will instead focus on driving device usage to maximize their profitability in the future. This "shifting balance of power," he said, could drag down shares of Apple.

Still, Um believes Apple had a strong just-concluded holiday season, in which he predicts the company sold 54.8 million iPhones and 24 million iPads. Apple will report its holiday quarter earnings later this month.