Earlier this week, UBS analyst Steve Milunovich once again reiterated a Buy rating on Apple (NASDAQ:AAPL) stock while lowering his price target. While his price objective was as high as $780 in December, the analyst’s target for the stock is now $600, which represents a 39.3 percent upside to the stock’s closing price on March 7. This compares against a 36.7 percent slide in the company’s stock price over the past six-month period ending on the same date.

Earnings forecasts have dropped alongside targets for the stock price. With his January cut, Milunovich reduced his profit estimate for fiscal-year 2013 from $47 to $44.68 per share, and his fiscal-year 2014 estimate from $55.85 to $52.80 per share. These reductions were largely the result of a survey conducted by Consumer Intelligence Research Partners, which found that demand for storage had declined — meaning fewer people would opt for pricier 64 GB iPhones — while demand for older models increased 50 percent in the iPhone 5 cycle, compared to just 33 percent in the iPhone 4s cycle. The result of this shift could yield a reduction in gross margins of up to 10 points.

But there’s still upside, and through all the turbulence caused by numerous analyst research notes on the stock, Milunovich has maintained that a deal with China Mobile (NYSE:CHL) remains a massive potential catalyst for the company. Such a deal could open up a torrent of revenue, and squelch controversial suggestions that Apple should break stride and play defense, instead of leading in innovation as it has historically done.

“It doesn’t appear to be in Apple’s DNA to cover market spaces just to get revenue,” commented the UBS analyst, according to Forbes. Observers have established the argument that under the leadership of former CEO Steve Jobs, Apple’s winning strategy was to invent new markets, dominate them for a period, and then move on. This is what happened with the iPod, the iPhone, and is now happening with the iPad. Apple effectively defined each of those product spaces, and now everyone is waiting for the next big thing.

But as Forbes points out, the markets are not patient. Innovation takes time, and iWatch rumors have failed to satisfy investor hunger for growth. The result has been demands that Apple appease shareholders with increased dividends and bigger stock repurchases — or release cheaper iterations of the iPhone and iPad to compete with lower-priced hardware running on Android.

Whatever the short-term remedy is, it seems to be divergent from the strategy that Apple has used in the past. That is, defending market share by competing at the lower-end of an established market is not what will win back investors. Releasing the next category-defining product will.

“Apple is driven to make beautiful products. Whether it is an iTV, wearable computers, or another new product category, we have faith that innovation is not dead,” wrote the analyst in December. Skepticism may have brewed since then, but many investors feel otherwise.

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