AAPL Stock: This Is Why the iPhone 7 Could Be Huge for Apple Inc.

AAPL StockIs Apple Stock About to Skyrocket?

It’s not just Apple Inc. (NASDAQ:AAPL) stock investors who are excited about the “iPhone 7” launch this September. In fact, a major wireless carrier just blamed its declining upgrades on consumers’ anticipation for the new iPhone.

We all know how important the iPhone is to Apple stock, but we have probably underestimated the smartphone’s influence on the telecom industry. On Thursday, Verizon Communications Inc. (NYSE:VZ) said that in the second quarter, it saw a surprisingly low number of customers upgrading their smartphones. (Source: “Verizon Seeing Slow Phone Upgrades as Customers Await Next iPhone,” Fortune, May 19, 2016.)

Who’s the culprit behind the slowing upgrades? The iPhone 7 is, which, in all fairness, hasn’t even been announced yet.

Speaking at the MoffettNathanson investor conference in New York, Verizon CFO Fran Shammo said that “upgrades are very slow right now.” He added that due to the expected launch of a new iPhone this fall, “customers are waiting to see what’s potentially coming in the fourth quarter.” (Source: Ibid.)

But after the new iPhone comes out, upgrades will pick up, right? Not so fast. Shammo said that he’s not sure about how consumers will respond. Rather, it will depend on whether the iPhone 7 has a “dynamic change.” (Source: Ibid.)

The slowdown in upgrades at one of the largest carriers in the U.S. coincides with the lackluster performance of Apple stock.

But there’s more…

It could also foreshadow a massive launch event for the iPhone 7.

Let me explain…

The Cupertino, California-based company usually gives a major update—one where they use a new integer to name their product—to the iPhone every two years. In between the two-year cycle, Apple usually releases an “S” model.

The last major update was the launch of the “iPhone 6” back in 2014. Apple fans cheered on the long-awaited release of a larger iPhone. In just three days after the phone’s September 19th launch, Apple sold more than 10 million new iPhone 6 and “iPhone 6 Plus” models, setting a record at the time. (Source: “First Weekend iPhone Sales Top 10 Million, Set New Record,” Apple Inc., September 22, 2014.)

Then there was the “S” model update. You would think that because the “iPhone 6S” models look basically the same as the 6, they wouldn’t be a big hit. But, as it turned out, reception was even greater than the major update. In just three days after the 6S’ launch in 2015, Apple sold more than 13 million new iPhone 6S and “iPhone 6S Plus” models. (Source: “Apple Announces Record iPhone 6S & iPhone 6S Plus Sales,” Apple Inc., September 28, 2015.)

How did investors react? Well, Apple stock went on a solid climb after the iPhone 6 launch. But the same cannot be said for the “S” model update. While AAPL shares also rose after the iPhone 6S launch, the good times didn’t last long.

Today, Apple stock is deep in the doldrums. Why? As you’d expect, iPhone sales are to blame.

You see, right now, the company is only about four months away from the expected release of the iPhone 7. Consumers who want to get the flagship model might decide to wait until then. And even if you want the current model, there is still an incentive for you to wait because by the time iPhone 7 comes out, the iPhone 6S will most likely get a price cut.

However you look at it, not many people are buying an iPhone right now. In fact, the company just had its first-ever year-over-year iPhone sales decline since the product was introduced in 2007. (Source: “Apple Inc. Q2 2016 Unaudited Summary Data,” Apple Inc., April 26, 2016.)

The disappointing performance of its bread and butter product kept Apple stock deep in the doldrums. Trading at $93.79 apiece on Thursday, AAPL shares have plunged almost 30% since last summer.

But note that the same thing that sent the stock down might also be able to bring it back up again.

If everyone is waiting for the upcoming iPhone 7, it should instantly turn into a big hit after launch, right?

Well, that’s highly possible. One of the reasons for that is Apple’s huge following. The company has perhaps the highest brand recognition in the smartphone business. And ever since the first iPhone came out, Apple fans have been lining up at Apple stores for each product launch.

But at the same time, competition is also getting intense. To convince a large enough audience to get the latest model, the iPhone 7 needs to be something special.

The Bottom Line on AAPL Stock

There have been many rumors and leaked pictures of what the iPhone 7 might look like and what features it may have. I’m not going to repeat them here. All I want to point out is this: a lot of consumers upgraded to the iPhone 6 after it came out in September 2014. If they bought the phone on a two-year contract, they will be eligible for an upgrade when the iPhone 7 comes out. Will that be a catalyst for Apple stock? Quite likely.