The current sour mood on Apple Inc. (Nasdaq: AAPL) will bleed into January and possibly longer.
Poor guidance from several Apple suppliers over the past several weeks has had analysts chopping their Q1 2016 iPhone sales forecasts. And the negative publicity has dragged down AAPL stock. Since Dec. 4, the Apple stock price has dropped by about 9.5%.
What's happening in this quarter will get reported at the end of January. Since the December quarter is always Apple's biggest thanks to holiday sales, it tends to control the direction of the stock in the early months of the year.
A weak Q1 Apple earnings report - or worse, an earnings miss - would keep the Apple stock price down, possibly pushing it below $100.
But investors shouldn't get too distracted by all the predictions of a decline in iPhone sales in Q1. While it won't be the blowout quarter we saw a year ago, an actual year-over-year decline would be surprising.
And Apple CEO Tim Cook warned analysts in 2013 about using supplier data in their forecasts.
"The supply chain is very complex and we obviously have multiple sources for things, yields might vary, supply performance can vary. The beginning inventory positions can vary," Cook said in the Q1 2013 earnings conference call.
And remember, as recently as August, analysts had themselves twisted up in knots over worries that China's slowing growth would hurt iPhone sales there. Those fears proved unwarranted, as Apple reported a 120% year-over-year rise in iPhone sales from China in Q4.
The silver lining to this month's falling iPhone sales forecasts is the gift of lowered expectations. Wall Street is factoring in this bad news now. If the iPhone can beat these lowered forecasts and sell enough to exceed last year's numbers even by a little bit, Apple stock will get a lift.
The picture brightens, though, when considering the Apple stock forecast for the rest of 2016 and beyond.
Here's why we'll see the AAPL stock price hit all-time highs before 2016 is over...
The analysts obsess over iPhone sales for good reason. The iPhone delivers about two-thirds of Apple's revenue. Consequently, it drives Apple stock.
So if the iPhone 6s merely treads water over the next few quarters, investors need to keep in mind that this is to be expected in Apple's "tick-tock" iPhone upgrade cycle.
The iPhone 6, introduced in the fall of 2014, was the "tick" cycle - a major upgrade with several compelling new features, such as larger screen sizes and Apple Pay.
The iPhone 6s is the "tock" part of the cycle. It got the usual upgrades in processor speed and camera improvements, and the somewhat useful 3D Touch feature. Not a monster upgrade.
You can see this cycle play out in the Apple stock price over the past few years. AAPL stock only gained about 10% in the six months leading up to the debut of the iPhone 5s, and another 10% in the six months that followed.
But when the iPhone 6 rumors started to percolate in the spring of 2014, AAPL stock took off, gaining about 33% over the next six months. The following April, after spectacular sales, the Apple stock price hit its all-time high of $134.54 - an additional 34% gain.
The iPhone 7 - expected to launch in September 2016 - falls on a "tick" cycle. It's bound to have at least one extremely tempting new marquee feature.
One rumor already circulating is the possibility of a nearly unbreakable sapphire screen. Another is that the new iPhone will be waterproof. We could see both.
Apple uses both technologies in the Apple Watch, so that's not out of the question.
Durability is a big issue for all smartphone users. A nearly indestructible iPhone 7 would give both sales and the Apple stock a huge jolt.
As the iPhone 7 rumors start to heat up in the spring and summer, so will AAPL stock. By August, the Apple stock price will have zipped past its all-time high en route to price targets in the $150 range.
Another positive long-range factor will be the new iPhone subscription plan, which allows users to upgrade to the latest iPhone each year. We won't see the impact of that until Q1 2017.
One wild card here is the possibility Apple will launch a lower-priced 4-inch version of the iPhone 6 in the spring.
Beyond the iPhone, here's what else you can expect from Apple in 2016...
The other third of Apple's business is split between hardware like the Apple Watch, the iPad, and the Mac, sales of digital goods such as music and apps, and services like iCloud and Apple Pay.
The Apple profit machine ultimately runs on the fuel of its ecosystem - the glue that ties all those elements together and keeps customers loyal to the Apple brand.
Here's a quick look at each of Apple's supporting players:
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About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.