Apple Dilemma: Does Everyone Already Have an iPhone?

Using some unusual analysis of global wealth demographics not typically seen in a stock report, Pacific Crest Securities makes a case against owning Apple by theorizing that just about everyone in the world who could pay for an iPhone already owns one.

"Street estimates for iPhone units in 2013 and 2014 would require the iPhone user base to grow to well over 300 million people exiting 2013 and to approximately 375 million exiting 2014," writes Andy Hargreaves, who downgraded the stock to "sector perform." "The 2014 user base would include 43 percent of the total number of people in the world who make over $15,000 per year, which is an unrealistic expectation in our view."

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Hargreaves, who used data from the World Bank Development Research Group, believes Apple's unprecedented saturation of the market won't happen and will force the company to make lower-margin, cheaper phones.

That or come up with such amazing new innovations with each new iPhone that current users replace their phones more quickly.

"The crux of our view on Apple is that we believe the company has already sold iPhones to the majority of global consumers who want and can afford one," said Hargreaves in the note.

(Read More: Apple Stock Bottoms Here: Tom DeMark)

The analyst has either made a bold new analysis exposing unrealistic Wall Street expectations for the world's most valuable company or put out the kind of eye-popping negative headline that marks the bottom in a stock that's dropped almost 30 percent in four months. Traders and other analysts seem to be on both sides.

"Insightful, but shallow thinking akin to saying that new car sales will decline because everyone who can afford one has one," argued Stephen Weiss of Short Hills Capital.

The market – at least for today – seemed to disagree with Pacific Crest, bidding the shares up four percent off their lowest level in 11 months.

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"Apple was the clear winner for the first 1 billion smartphones sold, but that is going to change as ASPs (average selling prices) continue to decline," said Colin Gillis, a BGC Partners analyst who agrees with Hargreaves. "You can't be a white table cloth restaurant and compete against McDonald's. The winners of the next 1 billion phones sold are likely to be the platforms that can extract value from use (search volumes, commerce) as the hardware becomes commodity priced."

(Read More: Apple Earnings Will Be Test for 'Painful' Selloff: Pro)

Now the bulls may argue that Apple will keep coming out with innovative products beyond the iPhone – like that iPad and iPad Mini – that drive further growth. But Pacific Crest doesn't see that happening and actually believes the iPad Mini is cannibalizing the iPad.

"We do not see an opportunity for a new product launch to drive meaningful upside to our estimates," wrote Hargreaves, who sees a fair value 12-month range for the stock between $440 and $550. "We do not believe an Apple television can add substantial profits without a differentiated service, which appears unlikely."

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