Apple may launch its iPhone 5S in June or July, Jefferies analyst Peter Misek said in a note to clients Tuesday.
According to the note, Apple is testing two new iPhone prototypes, one expected to be the iPhone 5S and the other a low-cost iPhone.
The tech giant is expected to begin making the new iPhone 5S in March for a launch within about four months, Misek said in the note.
Misek also reduced his estimates for iPhone shipments for the current March quarter from 48 million to 44 million, a number that he said is "still well above widespread fears of shipments in the mid-30Ms."
(Read More: Apple Stock Bottoms Here: DeMark)
As for the low-cost iPhone prototype—which is geared toward emerging markets— it is either close to getting the green light or has already been approved, he said.
"Similar to the iPad mini, we expect a concentrated low-cost iPhone, rather than a 'cheap' one," Misek said in the note.
Even though Apple's Phil Schiller dismissed rumors of a cheaper iPhone last week, Misek said the company is likely to produce one. It would mimic its more grown-up predecessor, but without such features as retina display and LTE capabilities.
A less expensive iPhone would help boost Apple's market share, but decrease gross margins and have little impact on earnings per share.
(Read More: Technology Now a Drag on US Earnings)
Apple's last phone launch was the iPhone5 in October. Sales were strong in the fourth quarter but have been below expectations so far this year. (Read More: Weak Apple iPhone 5 Sales 'Old News,' Stock to $800: Analyst)
Apple's stock has plunged 25 percent since its all-time high of $705 in September. The stock continues to be under pressure because of shrinking margins, but the worst is over in the near-term, Channing Smith of Capital Advisors Growth Fund said Wednesday on CNBC's Squawk on the Street.
"Back in September, Apple could do no wrong, and now they can do no right. So we think that Apple is a little bit overblown. Most of the focus is on margins, deteriorating margins," Smith said. "You have to understand this is the largest product refresh we've ever seen for Apple, so margins are going to take a hit. We think we've probably seen the lows for margins in the near-term."