Ahead of the Apple (NASDAQ:AAPL) iPhone 6s launch, several analysts expressed concerns about whether the company would be able to grow iPhone sales during the iPhone 6s cycle. For example, well-respected analyst Ming-Chi Kuo with KGI Securities expressed his view that Apple could very well see iPhone shipments contract in the first quarter of the company's fiscal year 2016.

I think that there is a good chance that Apple faces a relatively tough fiscal year 2016 as it struggles to match the kinds of unit shipments that it saw during the iPhone 6 cycle.

Fiscal year 2016 could be rough
It is not uncommon for smartphone buyers to replace their devices approximately every two years. This means that customers who have "non-s" iPhones (i.e. iPhone 4, 5, 6) will often upgrade to the next "non-s" model, while customers with "S" model iPhones (i.e. iPhone 4s, 5s, 6s) will upgrade to the next "s" model.

However, with the iPhone 6/6 Plus, Apple likely not only drove users of the iPhone 5 to upgrade, but the larger screen sizes may have "pulled in" some upgrades from users with the iPhone 5s -- an observation that's hardly novel at this point. What this might imply, though, is that a good portion of users who had previously been on the "s" iPhone cycle have now been effectively moved to the "non-s" cycle.

Don't get me wrong, though: the iPhone 6s is an extremely compelling device and for those who absolutely have to have the latest Apple iPhones, it's a really nice upgrade from the iPhone 6. However, I suspect that most people using the iPhone 6 will probably want to wait until the iPhone 7 launches before upgrading.

This "shift" of customers from the "s" cycle to the "non-s" cycle could make things pretty difficult for Apple's iPhone business during its fiscal 2016.

Fiscal year 2017 could be much better
Although things could be tough for Apple during fiscal 2016, the company's fiscal 2017 could prove to be much better.

The iPhone 7 will surely bring substantial improvements over the iPhone 6s, which is already a large leap in capability from the iPhone 6. If Apple does its job correctly -- and I have faith that the company will -- then Apple should benefit from the relatively large iPhone 6 installed base choosing to upgrade to the iPhone 7.

Additionally, if Apple's iPhone sales decline in fiscal 2016 relative to fiscal 2015 levels, then Apple will have a smaller unit/revenue base from which it needs to deliver growth, making a return to growth easier.

I'm not going to buy Apple stock now, but I'll be watching
I don't think that a potential "iPhone disappointment" is fully baked into the current share price, although the decline from the all-time high of $134.54 per share was probably driven in part by such fears.

If Apple's guidance for the first quarter of its fiscal 2016 disappoints (and since analyst consensus is actually calling for year-over-year growth, such a disappointment doesn't seem farfetched), I believe that the share price could move materially downward.

In that case, I would look to begin building a position in Apple on weakness (either via the common stock or via LEAP call options) in anticipation of a healthy iPhone 7 cycle.


 
 

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.