NEW YORK (TheStreet) -- Apple (AAPL) - Get Report is expected to start developing products for home automation, UBS IT hardware analyst Steve Milunovich said on CNBC's "Squawk Box" on Wednesday morning.

His comments come after Apple posted its first decline in annual revenue and profits since 2001 after Tuesday's closing bell. 

Apple reported earnings of $1.67 per share, topping analysts' expectations of $1.66 per share. Revenue came in at $46.9 billion, which was in line with analysts' estimates.

The firm tried to get a feel for the future of Apple products by asking CEO Tim Cook about "innovation going forward," Milunovich said. 

"Our sense is that they want to do things in the home automation. They want to do things with augmented reality. Perhaps they want to do a car. A lot of the technologies just aren't quite mature enough to pull those off yet," he explained. 

Because Apple needs to wait for technology capabilities to catch up to its ideas, it's going to be in a "gap period" for another year or two where its profits and revenue are reliant on the iPhone as kind of its "one-trick pony," Milunovich predicted. 

"[The iPhone] may be sufficient for now to take the stock a bit higher, but ultimately it's going to have to result in major new products," he added. 

The lag in technology is in the "general world," rather than just at Apple's R&D centers, he noted. 

"As much as people want new things from Apple, it's not like anyone else has come up with a major new product category," Milunovich explained. 

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The key takeaway from Apple's financial report for the third quarter is that earnings momentum has bottomed, meaning comparisons will improve and support the stock, he said. 

The tech giant also projected "unbelievable" revenue outlook between $76 billion and $78 billion for the fiscal 2017 first quarter, noted Milunovich. "Obiously it's kind of expected at this point, and that's what makes it hard to get to a trillion dollars," he added.

Shares of Apple were lower in late morning trading on Wednesday. 

(Apple is held in Jim Cramer's charitable trust Action Alerts PLUS. See all of his holding with a free trialhere.)

Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.

TheStreet Ratings team rates Apple as a Buy with a ratings score of B+. This is driven by multiple strengths, which the team believes should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks the team covers.

You can view the full analysis from the report here: AAPL

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