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Price Competition Makes Apple a ‘Sell’: Analyst

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While Apple looks forward to the launch of Apple TV this year and rumors buzz about an iPad mini, not all analysts are convinced that the stock is a keeper.

Edward Zabitsky, CEO and analyst of ACI Research, told CNBC’s “Squawk on the Street” that he rates the tech giant’s shares a “sell,” with a price target of $270.

Zabitsky believes that Apple’s iPhone could see some competition from the Samsung Galaxy and HTC 1X.

“The only reason [the release of the Galaxy] would matter is because Samsung is the top commodity producer of cellphones, the most vertically integrated, and in a more competitive market cost of production is everything,” he said, adding that Samsung is the only company who has the same purchasing power as Apple.

Samsung had a strong first quarter, selling 40 million plus cell phones, and Zabitsky says this put them ahead of Apple.

For Apple’s share price to reach his target, however, the iPhone would have to sustain serious margin erosion.

“We haven’t seen that yet,” Zabitsky said, “We have seen a $30 per unit increase in the cost of the new iPad versus the iPad 2 and that’s a ding in margins. And that could take the stock down to about 10 times the consensus — right now that’s about $460.”

While Zabitsky said that price competition is not yet steep enough to hurt Apple as much as he predicts it will, it is possible as new products hit the market. Phones developed by Microsoft, for example, cost consumers nothing after rebate.

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Disclosures:

Zabitsky has no relationships with companies in the industry.

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