Don't get too excited about iPhone sales, JPMorgan says

An Apple employee hands over Apple iPhone 7 phones at an Apple store on Sept. 16, 2016 in Berlin.
Getty Images

JPMorgan analyst Rod Hall told investors the recent rally in Apple shares due to iPhone 7 sales optimism is "premature" as unsustainable promotions are boosting demand.

Apple shares traded up 11 percent last week and are up 9 percent this year as the iPhone 7 went on sale Friday.

"In the case of both AT&T and VZ, our Telco team believes volumes are up a little due to the more aggressive-than-expected promos but not substantially over prior expectations," Hall wrote in a note to clients Monday.

"At present we believe the increased promos could pull demand into the Sept. Qtr."

The four major U.S. wireless carriers are offering a free upgrade promotion to the iPhone 7 after an iPhone 6/6s trade-in, which will likely end in October according to the analyst.

Hall reiterated his Apple overweight rating, yet according to Monday's note he has a price target of $107 for the shares that he set in July. That would represent 7 percent downside from Friday's close.