Apple (NASDAQ:AAPL) is planning its next big product launch event for March, reports Mark Gurman of 9to5Mac. The star of the show will be the Apple Watch 2, which is scheduled to go on sale in April 2016, according to Gurman's sources.
Apple stock has been floundering since this summer, mainly because of worries about slowing iPhone growth. Depending on what other products Apple announces, a March product launch event could go a long way toward getting the stock back on track.
Lots of potential products
Apple first introduced the Apple Watch in September 2014, but it gave a more detailed look at the Watch in March. That lends credibility to the report that it intends to launch the second-generation Apple Watch in March 2016.
Well-connected Apple analyst Ming-Chi Kuo has been reporting lately that Apple will launch a new 4-inch phone in the first half of 2016. This device -- tentatively labeled the iPhone 6c by pundits -- would essentially be an iPhone 5s with upgraded hardware. Kuo's good track record of Apple product predictions means the iPhone 6c would likely be included in a March product launch event, too.
Additionally, as my Foolish colleague Ashraf Eassa recently wrote, much of Apple's MacBook lineup is due for a refresh. The Mac Pro lineup could also be ready for an upgrade by March. Finally, Apple didn't introduce a successor to the iPad Air 2 this fall, so it wouldn't be too surprising to see the iPad Air 3 arrive in the spring.
An iPhone 6c could keep unit sales steady
Of all these potential new products, the rumored iPhone 6c might be the most important to Apple's near-term performance. Adoption of the iPhone 6s and iPhone 6s Plus is clearly running behind that of the iPhone 6 and iPhone 6 Plus a year ago. Apple is on track to reach "normal" inventory levels for both models months before it did in last year's product cycle.
Apple is still likely to post iPhone sales growth this quarter due to inventory growth, some timing differences compared to last year, and stronger sales of discounted older models. But without a new sales catalyst, Apple could post year-over-year iPhone shipment declines in the next couple of quarters.
This wouldn't be the end of the world, as the arrival of the iPhone 7 later in 2016 should get iPhone sales growing quickly again. However, launching an iPhone 6c in March could help minimize the potential sales slowdown that might otherwise occur before the iPhone 7 goes on sale.
I don't expect the iPhone 6c (if it even exists) to be a massive hit. In a recent poll of U.S. consumers, only 20% said they prefer a 4-inch screen size. Still, that represents a noteworthy pool of demand that Apple could tap into with the iPhone 6c, and it could be the difference between stable iPhone sales and significant declines during the next two quarters.
Other products could bolster non-iPhone revenue growth
Longer term, Apple needs to get stronger growth from its other product lines to diversify its revenue away from the iPhone. New products from the March event could help Apple make progress toward this goal.
Most importantly, the Apple Watch 2 is likely to bring noticeable improvements that drive higher adoption of this new product line. For comparison, Apple sold fewer than 6 million iPhones in the first four full quarters after the product was launched. In the next four quarters, the upgraded iPhone 3G drove sales of more than 20 million units.
Similarly, Apple sold 19.5 million iPads in the first four quarters of availability. The launch of the iPad 2 caused unit sales to more than double to 47.6 million in the following four quarters. Apple hasn't said exactly how much revenue the Apple Watch is generating, but it's clearly billions of dollars a year. If Watch revenue were to more than double in the second year of availability, it would start to have a significant impact on Apple's results.
An iPad Air 3 launch in March could also be the final piece of the puzzle needed to return the iPad line to strong growth in 2016.
The recently launched iPad Pro is opening up a new, potentially lucrative market for the iPad, while the iPad Mini 4 is a big improvement on previous 7.9" iPads. However, more than 70% of iPad usage still comes from 9.7" models. Many of these are reaching prime replacement age, and a new state-of-the-art iPad Air 3 could therefore catalyze a major upgrade cycle.
Finally, while new MacBooks or Mac Pros aren't likely to drive a massive change in the Mac sales trend, it's still necessary to update them every so often to keep sales growing. Indeed, the Mac product line has generated steady sales growth for Apple in the past few years.
There are a lot of ways that Apple could delight shareholders this March. But we'll have to wait until then to find out which new products will be debuting next spring.