Apple's iPhone business, its money-making machine that drove 60% revenue last year, is "in a difficult spot," Credit Suisse said Thursday.

The bank initiated its coverage on the tech giant with a neutral rating, citing a slowdown in smartphone demand and the iPhone business reaching maturation. It expects iPhone sales to decline 12.4% in 2019 after dropping 3.2% in 2018.

"iPhone is in a difficult spot with units >20% below peak as users are holding on to their devices longer than ever (4 years per CSe) and price hikes have likely run their course," Credit Suisse's Matt Cabral said in a note to clients.

Apple's flagship business took a hit when the company rolled out overpriced iPhones last fall, adding pressure to the already saturated and competitive market. The iPhone maker then lowered its first-quarter guidance, following weaker than expected iPhone sales and a weakening economy in China.

The slowdown in China has been a headache for Apple as it continues to lose share to local brands. Apple slashed iPhone prices by 6% in China after revenue in the region fell 27% year over year in the first quarter. Credit Suisse said there might be "no quick fix" in sight to turn it all around.

"Beyond macro conditions, we see deeper structural challenges in China and do not expect a meaningful turnaround without a major iPhone refresh, which is unlikely until 5G in CY20," said Cabral, the investment bank's director of equity research.

Amid the slowing iPhone business, Apple is aiming to shift its focus on services, hoping to monetize the massive user base. The company debuted a slew of new subscription services two weeks ago, including a TV service, gaming bundle, and magazine subscription, but Credit Suisse said the transition can't be done in the blink of an eye.

"We recognize the potential in the shift to services, but believe it will take time for that view to play out," Cabral said. The analyst sees the service business growing to $65 billion by 2021 from $40 billion in 2018.

Credit Suisse set a 12-month price target for Apple at $209, just a couple points above its current trading level of about $201. Its share price was unchanged Thursday morning.