"China is clearly a contributor but Apple is losing share in smartphones. And it's losing share, I think, because ultimately its products are very richly priced and in consumers' eyes, they don't offer a compelling enough reason at that price point for them to trade in their older phones," he said on " Fast Money: Halftime Report ." "That's, I think, the core challenge."

Sacconaghi, rated the No.1 Apple analyst by Institutional Investor, lowered his price target on the company to $160 from $210 after CEO Tim Cook warned investors late Wednesday to expect lower revenue for its fiscal first quarter. Apple blamed a variety of factors, including a weakening economy in China and lower-than-expected iPhone revenue.

Apple may be dealing with macroeconomic challenges in China but that's not the biggest problem facing the tech giant, Bernstein senior technology research analyst Toni Sacconaghi told CNBC on Thursday.

Tim Cook, Chief Executive Officer of Apple Inc., takes a selfie with a customer and her iPhone as he visits the Apple Store in Chicago, Illinois, U.S., March 27, 2018.

In an interview with CNBC's Josh Lipton on Wednesday, Cook said, "Our shortfall is over 100 percent from iPhone and it's primarily in greater China."

"It's clear that the economy began to slow there for the second half and what I believe to be the case is the trade tensions between the United States and China put additional pressure on their economy," the CEO added.

In a rare acknowledgment of slowing sales, Apple lowered revenue guidance to $84 billion, down from the $89 billion to $93 billion it had previously projected. The company cut its gross margin forecast to about 38 percent from between 38 percent and 38.5 percent.

"The magnitude of the decline in iPhones was bigger than anyone had anticipated. There were lots of warning signs from the supply chain that iPhones would be weak. But the initial reaction is that it was worse than we thought," Sacconaghi said.

He doesn't expect Apple to necessarily drop the cost of the phones because it is a "premium brand" and would instead try to bring new innovation to the marketplace rather than a lower price. However, it could decide to come out with second, lower-priced versions of its higher-end phones, he explained.

Apple shares tumbled after the news, closing down 10 percent on Thursday.

Sacconaghi wouldn't buy the the dip right now.

For one, Apple is still not that inexpensive in relation to the rest of the market, he said. Also, we don't know if the company's numbers can still come down further, he added. "Things could get worse in China."

"Given that valuation isn't compelling, given that numbers might still need to come down and given that we don't think next year's iPhone cycle is going to be particularly compelling, I'm not so sure you need to run out and buy the stock," he said.

However, he's not selling because the services business is still growing.

"That makes Apple a better company and provides a road map for improving earnings going forward," Sacconaghi said.

— CNBC's Steve Kovach contributed to this report.

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