AAPL, below $400 a share, may fall more

AAPL needs to announce a dividend increase or its share price will fall even more, warns analyst Dan Niles. Its lack of products at the low end and middle range of the market has already pushed AAPL down from more than $700 a share to less than $400.

If Apple doesn't announce a dividend increase when it reports earnings next week, you can expect to see the stock price continue to drop, Dan Niles, a senior portfolio manager for AlphaOne Capital Partners, told CNBC's "Squawk on the Street" Thursday.

"In the near-term the biggest excitement, quite honestly, is if they move the dividend up when they report the quarter, a better cash return," Niles said. "That's what I'm looking for and if they don't do that then the stock could go quite a bit lower."

Apple's stock price has tumbled to below $400 recently, far from its all-time high of over $700 last September. And the stock price will move even lower if Apple doesn't tackle some fundamental problems with its business strategy, Niles said. 

"The only thing you know for certain right now is that Apple is not producing products for the entire market space and Samsung is absolutely killing them. They are not producing phones for the mid-range to low-end of the market and they are not producing phat phones like Samsung is and they are not with all the carriers either," Niles said. (Read More: Forget the Phone or Tablet: Get Ready for the 'Phablet' )

Despite its fallen stock price, some investors remain bullish on Apple because they expect product launches this summer to drive the share price back up. However, it's unlikely Apple will launch a device that is really a game changer for the stock price, Niles said.

Apple really needs a variety of phones with different screen sizes and a low-cost smartphone to meet market demands and it's unlikely the company will do that soon, Niles said. (Read More: New Apple iPhone to Come in Different Sizes: Analyst )

"Here's the problem if you are a bull. You are implicitly ignoring what Tim Cook told you on the last conference call. Because someone asked him about the screen size...and the answer was, 'We've put a lot of thinking into screen size and we picked the right one.' So you aren't going to get a bigger phone," Niles said. "And in terms of producing a lower-end phone, that question was asked as well and the answer was 'The most important thing to Apple is to make the best products in the world'...so the implicit answer was no, we think being at the higher end of the market is fine." (Read More: Apple Is Building Something Bigger Than a TV )

Apple's strategy of making phones for the high-end market worked in the past because no one else had the product that Apple offered. But the company can't afford to continue that strategy now that other vendors have caught up, Niles said.

The iPhone maker now has to introduce new products that not only meet market demands, but it also needs to introduce completely new devices.

"Yeah they do have products coming, but if you just get another phone that has more power to it and there's no different form factors that's going to be an issue. Now Apple TV, I think they will come out with a TV product that is something that Tim Cook said they have an intense interest in that area, but that will probably come in the summer period at some point, but I think we are going to have to wait awhile for a low-end phone," he said. 

Apple—which has missed earnings expectations the past three quarters— is expected to have another weak quarter. But just because the March quarter is forecast to be bad, does not mean that the earnings are already priced into the stock price, it could go even lower, Niles said. (Read More: Apple to Announce Cash Move Soon: Analyst )

"Don't forget, this company has missed three quarters in a row. The stock may have gone up because people were willing to ignore it for awhile, because it's Apple and obviously Apple is going to $1,000 a share," Niles said. "My fundamental rule with investing in technology stocks, because unlike a lot of different industries, you have the market share leaders of yesteryear sometimes falling on bad times."

He added, "Until you see products improving and demand improving, don't try to guess where the bottom is because that is just a recipe get yourself into trouble."