UPDATE 1-Ingram shares fall on margin fears, Citi downgrade

* Ingram Micro falls 9.3 percent

* Analysts cite pressure on margins, stock near top

* Citigroup cuts Ingram to "hold" from "buy" (Adds quotes from Citigroup, Goldman Sachs notes)

SAN FRANCISCO, July 31 (Reuters) - Shares of Ingram Micro Inc (IM.N) fell on Friday on concerns that margins will drop following news it is looking to increase market share, and after Citigroup downgraded the stock to "hold" from "buy."

The stock slid 9.3 percent to end at $16.82. Citigroup (C.N) cut the stock's rating shortly before trading opened, citing weak margins in North America and Europe where Ingram has heavy exposure, and an 89 percent rally in the shares over the past 5 months.

"Europe continues to be the worst-performing region" for the company, Citigroup analyst Richard Gardner wrote. He said he did not see a prospect for much improvement soon, which was important because the Ingram is heavily exposed there.

During Ingram's earnings conference call on Wednesday, Chief Executive Gregory Spierkel noted the company is operating in an economic climate that "continued at its tepid level during the second quarter but ... is not deteriorating."

That assessment left Gardner doubting there was much room for the stock price to rise.

"Valuation is beginning to look stretched," he wrote. "We believe IT demand has to significantly improve for (Ingram Micro) shares to move meaningfully higher."

He noted the company's statement that it is returning to seasonal patterns, and said that will mean growth "in the low single digits."

Other analysts focused on Ingram's statement on Thursday that it now plans "to place a greater emphasis on securing incremental sales while maintaining our focus on operational excellence and profitability."

Analysts said the company will see its gross margins drop as it tries to take away market share from competitors Tech Data Corp (TECD.O) and Synnex Technology International Corp TCNI.PK.

"We think Ingram's competitors would respond to any pricing actions, so this is something we will be watching closely for the group," said Craig Hettenbach and David Bailey of Goldman Sachs in a note after the company reported earnings on Thursday.

Chief Executive Gregory Spierkel told Reuters in an interview on Thursday that the company was looking to increase business in Sweden, several other European countries and in Asia. (Reporting by David Lawsky, Editing by Phil Berlowitz and Richard Chang)