iPhone 8 Could Shake Up AAPL Stock Forecast in 2017

AAPL StockHow iPhone 8 News Elevates AAPL Stock

The truism holds that there is no faster way to cause mass hysteria among techies than a press release—or widespread rumor—about the next iteration of the “iPhone.” And that excitement has only increased with every scintilla of the next-generation “iPhone 8” news.

With the Apple stock price hitting all-time highs on the back of rumors regarding the next smartphone, especially its augmented reality (AR) technology, alongside the 10th anniversary of the original iPhone launch, you have what may prove to be Apple Inc.’s (NASDAQ:AAPL) biggest event in years. Analysts are busy revising up their AAPL stock forecast.

The iPhone 8 rumors are numerous, and run the gamut from a new screen design to wireless features to being the first iPhone AR-capable release. AAPL stock, for its part, loves this. Rumors, substantiated or totally bogus, can only help build hype around what is shaping up to be one of the most potentially revolutionary models in years.

Take, for instance, a recent interview that Apple CEO Tim Cook gave to The Independent. Cook laid out his views on augmented reality and why he’s so excited for the next-generation tech that is increasingly entering the mainstream.

“I regard it as a big idea like the smartphone,” he said. “The smartphone is for everyone, we don’t have to think the iPhone is about a certain demographic, or country or vertical market: it’s for everyone. I think AR is that big, it’s huge.”(Source: “Apple CEO Tim Cook: As Brexit hangs over UK, ‘times are not really awful, there’s some great things happening’,” The Independent, February 10, 2017.)

That’s quite the praise from a leader that has taken on a much more modest tone when compared to his predecessor, the legendary Steve Jobs.

“I get excited because of the things that could be done that could improve a lot of lives. And be entertaining. I view AR like I view the silicon here in my iPhone, it’s not a product per se, it’s a core technology. But there are things to discover before that technology is good enough for the mainstream,” he continued.

So Tim Cook is an iPhone AR evangelist. He clearly loves the tech, and his mentioning of it has sent a fervor among iPhone lovers and tech analysts alike. As a result, the Apple stock price hit an all-time high at $135.00 per share.

As we inch closer to the iPhone release date, which we can assume based on past roll-outs will be sometime in September, those numbers are more than likely to rise higher, barring unforeseen circumstances.

Couple this with further iPhone 8 rumors, like wireless charging capabilities and the eradication of the home button, and you end up with the perfect storm of publicity that can only help AAPL stock.

For instance, the U.S. Patent and Trademark Office published an Apple patent on a technology called “interactive display panel with IR diodes.” The feature is essentially the culling of the physical home button in favor of a virtual display centered on fingerprint recognition. Apple has already pushed fingerprint tech on its most recent iPhone models, so this would be a logical step towards a sleeker, buttonless iPhone. (Source: “Apple’s Latest Patent Suggests Big iPhone Changes Are Coming,” Fortune, February 13, 2017.)

The iPhone 8 wireless charging speculation began when the company joined the Wireless Power Consortium, an industry group. This could signal a move towards surface-based charging and further away from wires. And we all know how much Apple hates wires. Just ask any “AirPods” owner who shelled out $219.00 for earphones. (Source: “iPhone 8 to come with wireless charging, Apple move hints,” The Telegraph, February 14, 2017.)

But I digress. All these scenarios above amount to hearsay and inferences. The same goes for the organic light-emitting diodes being used in the screens. All these improvements are well within the range of possibilities, but we simply don’t know what’s iPhone 8 news versus iPhone 8 rumor.

Consider that in November, it was reported that 10 designs were vying to become the next model. So don’t feel bad if you have no idea what the next smartphone will bring to the table; Apple’s still trying to work out the kinks itself.

Will iPhone 8 Boost Apple Stock?

Apple iPhone Sales from Q# 2007 to Q4 2016

iphonesales

We’ve covered the iPhone 8 itself as a piece of technology and what it may or may not offer the consumer. But how will it impact the AAPL stock forecast? What can it offer the iPhone shareholder?

Frankly, a lot.

Back in November, one number came out to show just how dominant Apple is in the smartphone market and why it is consistently either one of the most profitable companies or the most profitable company in the world. The number was 100%. Or rather, above 100%. According to BMO Capital Markets analyst Tim Long, Apple accounted for more than 100% of the profits in the smartphone market because some other vendors lost money.

Despite only having 13.2% of the market share (based on BMO estimates from the most recent Q3), that was more than enough to make the iPhone the most revenue-generating phone around by a wide margin.

So what does that mean for iPhone 8 sales?

Some analysts believe that a new and improved iPhone will shatter sales records, putting sales numbers in the 120 to 150 million range.

Others, though, are far more skeptical of an iPhone resurgence in 2017, especially in the first half of the year before the release of the iPhone 8. It’s a classic tale of bulls versus bears in pursuit of the tech giant, with backers believing in gaudy numbers and doubters professing doom on AAPL stock.

And the competition is only heating up in the smartphone market—sometimes literally. While the “Samsung Galaxy Note 7” blew it self out of the market by spontaneously catching fire and therefore forcing a recall, expect the Apple rival to come into 2017 swinging in order to gain back some lost momentum.

Google’s “Pixel” phone has also become something of a darling among techies. With rave reviews and the backing of a hugely popular and powerful development team, you have some conceivable heavyweights coming into 2017 that could challenge iPhone dominance.

Consider also that many first-time smartphone buyers will be coming out of the developing world, where iPhones—especially new ones—are simply not priced appropriately to appeal to consumers in emerging economies. Case in point: $219.00 earphones.

In those markets, “Android”-operated handsets win out. Bargain-priced smartphones have never been within Apple’s wheelhouse, and the iPhone 8 is unlikely to be a departure. While more affordable offerings may be available, ultimately, the product will likely be targeted to Western audiences looking to upgrade. But that hasn’t stopped Apple from selling an absurd number of iPhones in the past.

It’s also true that huge iPhone sales will jack up AAPL stock prices, but a lack of sales doesn’t necessarily mean shares will collapse.

Take 2016. The year saw three consecutive quarters of year-over-year decline in iPhone sales for the first time ever, but Apple stock still managed to gain over seven percent by the end of 2016. (Source: “Global Apple iPhone sales from 3rd quarter 2007 to 1st quarter 2017 (in million units),” Statista Inc., 2017.)

And then, of course, the most recent Q1 results showed Apple back on track, with sales numbers beating the previous year and setting a record high at 78 million units shipped.

Nevertheless, there are concerns over the slumping sales, which makes the iPhone 8’s success that much more important, even if it may not be do-or-die type stakes.

Apple Stock Forecast 2017

Apple Chart

Chart courtesy of StockCharts.com

Should you buy Apple stock? That’s a question every investor has to answer for themselves, but if you’re on board with the next iteration of the iPhone 8 and believe that it can deliver on the hype and promise, now might be the right time to jump aboard. The company has already surged by 16% since the beginning of the year, so 2017 has so far shaped up very well for Apple bulls.

But things are rarely that simple.

A big caveat to consider with the record-setting AAPL stock price is that the company’s market cap is still about $70.0 billion short of where it was two years ago, the last time the company edged around $130.00 per share. Looking deeper at the numbers, compared to 2015, Apple is actually in a weaker position, with 16% lower net income and nine percent lower earnings per share. (Source: “Don’t be fooled by Apple’s record high,” CNBC, February 14, 2017.)

The current rise in stock price is partly due to stock buybacks, where Apple increased earnings per share by culling stock. Apple engaged in $70.0 billion worth of buybacks over the last two years, and over the last five, the company has eliminated more than a billion shares.

Apple’s last four quarters also earned it $45.2 billion in net income, which is quite the departure from the $53.4 billion it earned in the four quarters ending September 2015.

If the buybacks and weaker performances compared to past years scare you off, you might want to avoid the tech behemoth. But if you’re high on the iPhone 8 sales potential, then this might just be one of the hotter stocks of the year, if the new model really can shatter expectations—not to mention sales records. In any event, it’s going to be an exciting 2017 for Apple.