People try out the new iPhone X during a media event at Apple's new headquarters in Cupertino, California on September 12, 2017.

The iPhone cycle will disappoint this year, according to one Wall Street analyst, who issued a rare downgrade of one of the market's most popular stocks.

Longbow Research lowered its rating for Apple shares to neutral from buy, predicting the company will ship fewer iPhones than expected in fiscal 2018.

We are "seeing only a good, not great iPhone cycle," analyst Shawn Harrison wrote in a note to clients Wednesday. "Apple found iPhone price elasticity with the introduction of the X blunting some demand. Reception of the iPhone 8/8Plus was lukewarm with Apple shifting production back toward the iPhone 7 as a result."

The analyst reduced his fiscal 2018 iPhone unit shipment forecast to 233 million from 248 million versus the Wall Street consensus of 239 million.

"The iPhone is still 60 percent of Apple's sales. So with expectations likely to have to come down for that product I think the stock here just settles out a bit," Harrison said on CNBC's "Power Lunch" Wednesday.

Apple opened Wednesday's trading session down 0.3 percent.

The last time Apple was downgraded was by Nomura Instinet on Dec. 19 to neutral from buy, which cited the company's high valuation compared with previous iPhone cycles.

On the other hand, Bank of America Merrill Lynch reiterated its buy rating and raised its price target to $220 from $180 for Apple shares, which is 25 percent above Tuesday's closing price. It is also the highest target among major investment banks that cover Apple.

Apple's stock is up 50 percent the last 12 months.



