Source: Apple.

Apple (NASDAQ:AAPL) stock is priced for modest growth over the middle term. In particular, earnings and sales forecasts for fiscal 2016, meaning the 12-month period ending in September 2016, look quite conservative. There is a respectable chance that the company will do better than expected, and this could provide a considerable boost to Apple stock.

Modest expectations
Wall Street analysts are on average forecasting that Apple will make $245.7 billion in revenue during fiscal 2016. This is a massive number, but still an unassuming growth rate of 5.5% versus $232.8 billion in expected sales during the fiscal year ending in September 2015.

On a similar note, earnings per share are on average expected at $9.76 during next fiscal year; this would be an increase of only 7.6% from $9.07 in forecasted earnings per share for fiscal 2015.

Wall Street is clearly expecting a big deceleration in growth during fiscal 2016 in comparison to fiscal 2015. As a reference, revenue forecasts for the year ending in September 2015 imply a growth rate of 27.4% versus the prior year, while earnings per share are forecasted to jump by a vigorous 40% over fiscal 2014.

Since analysts are modeling a material slowdown in growth, Apple stock is trading at a relatively cheap valuation. Apple carries a forward P/E ratio of nearly 13 times earnings forecasts during fiscal 2016, a material discount versus the S&P 500 index and its forward P/E ratio in the neighborhood of 18.

While Apple could outperform
According to a report from The Wall Street Journal, Apple is telling its suppliers to prepare for an initial production run of between 85 million and 90 million units of its new iPhone model. The device, which will probably be launched in September of this year, will be the main driver for Apple during the year ending in September 2016.

Initial production plans for the iPhone 6 called for between 70 million and 80 million units, and demand outstripped supply by a considerable margin during the first months. Apple seems to be expecting avid demand for the new iPhone models during fiscal 2016, while analysts polled by FactSet are forecasting an increase of only 1% in unit sales versus fiscal 2015.

Wall Street analysts could be underestimating the fact that the bigger-sized iPhone 6 and iPhone 6 Plus models are doing remarkably well from a competitive point of view. In the words of Apple CEO Tim Cook: "We're seeing a higher rate of switchers than we've experienced in previous iPhone cycles." If Apple keeps gaining share versus the competition in smartphones, maybe the company can sustain higher growth rates than Wall Street anticipates.

Also, emerging markets look like particularly promising growth drivers for Apple over the middle term, since demand has been off the charts lately. iPhone units sales grew 63% in emerging markets during the quarter ended in March, while total revenues in China jumped by an impressive 71% year over year.

Apple is also launching new products and services such as Apple Watch, Apple Music, and Apple Pay. Even if it's hard to tell how much money these initiatives can generate next year, their combined impact could be respectable.

When it comes to earnings, Wall Street could be underestimating the impact of share buybacks, which reduce the amount of shares outstanding and increase earnings per share at a faster rate than net income. Apple reduced its diluted share count by 5.2% year over year in the March quarter, and it also increased its share-repurchase authorization to $140 billion from the $90 billion level announced last year.

Wall Street expects a material deceleration in growth during fiscal 2016, and Apple stock is priced for such scenario. Considering the remarkable strength in iPhone demand, especially in emerging markets, in addition to new products and services and the impact from share buybacks, it would not be a big surprise to see Apple outperforming those forecasts. If this happens, Apple stock could deliver big gains for investors over the middle term.