Apple Inc. (NASDAQ: AAPL) did not quite get the reception it would have liked from Main Street and from Wall Street for its two new iPhone models. Frankly, the company should not be surprised. Now we have one key analyst report showing a downgrade from Bank of America’s Merrill Lynch. The firm has downgraded Apple shares to Neutral from Buy, as Tim Cook’s presentation just did not make the score that investors needed for a passing grade. It turns out that filling the shoes of Steve Jobs is a nearly impossible task.

Story updated at 10:00 a.m. EST on Wednesday for Credit Suisse downgrade summary and also for share price change.

What really stands out in this Merrill Lynch call is that the downgrade seems to be more of a sentiment shift rather than a mathematical shift. That is because the Merrill Lynch team maintained its $520 price target, and it issued no changes to the earnings estimates of $44.85 per share in 2014 and $51.00 per share in 2015.

The research team was led by Scott Craig and Samuel Park, and they said:

We downgrade to Neutral on (1) lack of a “lower-end” iPhone and price points that will be too high to increase penetration in emerging markets (2) no China Mobile agreement, (3) a likely less than expected impact from China Mobile, when/if a partnership is announced — higher than expected pricing, no lower-end iPhone, (4) another “evolutionary but not revolutionary” iPhone product launch, and (5) risk to near term gross margin estimates, given typical lower gross margin on new iPhones (in this case both 5C and 5S, as opposed to only one new launch). On a positive note, the company did add NTT DOCOMO.

Now the firm even sees less upside from a likely China Mobile Ltd. (NYSE: CHL) deal down the road. The team expects that when, or if, a China Mobile deal is announced, there likely will be only an incremental 6 million more iPhone units annually, versus a prior expected number of 170 million. China Mobile’s 3G/4G network is underdeveloped and actually should dissuade some purchases.

The team concluded with some brief positives here. It said:

Key positives for the Apple story remain, including valuation and capital allocation (buyback, dividend yield), although sentiment near-term should take a pause after a run up and positive earnings per share revisions may not occur, given aforementioned issues.

Apple shares closed down $11.53 on Tuesday at $494.64. The stock was indicated down another $13 or so around $482 in premarket trading Wednesday, but shares traded down about 5% to break back just under $470 in early Wednesday trading.

Also note that Credit Suisse downgraded Apple to Neutral from Outperform as it sees panic replacing complacency. The Credit Suisse downgrade involves significant earnings reductions for 2014, while the Merrill Lynch downgrade involved no cuts on earnings estimates.

Be advised that the stock chart from Apple still has much support just above the $460 level. Its 50-day moving average has just crossed above the 200-day moving average, and those averages are $460.25 for the 50-day moving average and $458.67 on the 200-day moving average.

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