Updated from 2:03 p.m. with additional information.
After a somewhat rocky end to the iPhone's first decade,
Apple bulls are looking for an iPhone 8-led rebound.
CEO Tim Cook took a pay cut after the first-ever year-over-year declines in iPhone sales led to a drop in sales, nearly ten years to the day that Steve Jobs first told fanatics that Apple would cram a smart phone into an iPod, revolutionizing the consumer technology and telecommunications industries.
China will play a pivotal role in the next chapter of the iPhone's story. Even after headwinds this year, the iPhone maintains strong market share in China. But key questions include whether new screens and form factors will revive growth in the world's largest market -- and whether President-elect Trump will complicate matters by starting tariff wars.
The iPhone's declines were a major reason that Apple's net sales declined 8% to $18.1 billion during fiscal 2016. Unit sales dropped 8% to about 212 million in 2016, after leaping 37% to 231 million the prior year.
Globally, Gartner puts the iPhone's share of the global smart phone market at 11.5% at the end of the third quarter, down from 13% at the same period in the year before.
Samsung which has suffered through a recall of the Galaxy Note7, has the largest stake with 19.2% of the close of the third quarter, down from 23.6% the year before. Next is Huawei, which climbed 1% from 2015 to 8.7% at the end of the third quarter. Chinese phone maker Oppo increased its global market share to 6.7%, from 3.4% at the close of the third quarter of 2015.
Apple does better in the market for premium phones, which have advanced cameras and other features. UBS puts Apple's global share of the premium market at 39%, in 2016 down from 41% the year before. Samsung is next with 30%, an increase from 29% in 2015. Apple has long accounted for the lion's share of global profits in the smartphone market, however.
"[W]e keep hearing that there are already cutbacks on the iPhone 7 production and only the super-bulls think that's because the company is trying to set up for a huge iPhone 8 cycle." said Jim Cramer and Jack Mohr, the manager and research director for the Action Alerts PLUS portfolio, which owns Apple. The pair also believe Apple would be a big beneficiary of a tax holiday on overseas cash. But they expressed some caution on its stock.
"At 13x earnings, the stock's a bargain, but you have to ask, hasn't it been a bargain for a full year now?" they continued.
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Morgan Stanley analyst Katy Huberty recently named Apple her top stock pick for 2017, with an expected "supercycle" in iPhone sales accounting for much of the enthusiasm.
"While we see the potential for accelerated upgrades across Apple's user base, China is likely to contribute the most robust growth due to a much larger upgradeable user base after strong adoption of the iPhone 6 two years ago," she wrote.
The next iPhone, expected to be announced in September 2017, will likely have a flexible display, better battery and other benefits to lure customers, Huberty suggested.
"Our view is that Chinese consumer loyalty to Apple remains high, evidenced by stable market share of 80% at the high-end of the market, and that weak demand is a function of the lack of a form factor change during the iPhone 6S/7 cycles," she wrote. Samsun has the next-largest market share in China's market for phones costing at least $500 with an 11% stake, according to Morgan Stanley, while Huawei is third with 8%.
If Huberty is right about the iPhone 8, the boom would come in Apple's 2018 fiscal year, which starts in September.