Editor's Note: This article was originally published Jan. 15, 2016. It was updated June 9, 2016, to reflect relevant changes.
As they looked to recoup some of their slight losses from 2015, investors in technology giant Apple (NASDAQ:AAPL) had plenty of reason to be optimistic heading in 2016.
Unfortunately, the Apple news thus far this year has been anything but upbeat. Its stock has fallen roughly 6% by mid-June as a number of negative stories have further obscured the company's outlook.
However, with an updated iPhone due out later this year, past data suggests that Apple is in fact a screaming buy in 2016. Crucially though, the ideal time to buy might not be today, for two important reasons.
The case for waiting
For those who haven't been closely following the Apple story, the recent downward pressure on its shares has largely been tied to concerns about demand for its iPhone 6 and 6s Plus. According to a number of credible media reports, Apple has reduced orders from component suppliers for its all-important smartphone. In one particularly troubling anecdote, Chinese electronics supplier Foxconn, which assembles most of Apple's iPhones, reportedly received a $12 million subsidy from the Chinese government to help the firm minimize firings related to Apple's production slowdown.
Apple's Q2 earnings report came in well short of analysts' expectations in late April 2016. Possible ongoing weakness in iDevice demand has led to understandable concerns that Apple's third-quarter earnings report could also come in lighter than analysts expect, which could generate further negative sentiment about its shares. That's not to say, however, that the time to buy Apple isn't around the corner.
Apple a buy in the second half?
Though near-term risk factors understandably loom large, Apple's historical trading record supports the case for owning its shares in the run-up to a new iPhone launch. Most rumormongers expect a September 2016 release for the iPhone 7.
Apple is a product-driven company, and as such, investors' anticipation for its upcoming products influences its stock price performance to some extent. And with the iPhone sitting at the epicenter of Apple's product universe, the excitement generated among investors each time the company updates the device's form factor has typically led to a marked outperformance in the stock.
It's important to recognize this caveat: Correlation isn't necessarily causation here, so investors can't interpret these previous performances as gospel. However, this does serve as a logical basis to help explain why Apple would outperform in the run-up to each new iPhone.
|Device||Apple||S&P 500||Relative Performance|
|iPhone 4 (12/7/09-6/7/10)||32.80%||-4.78%||37.58%|
|iPhone 5 (3/12/12-9/12/12)||21.34%||4.78%||16.56%|
|iPhone 6 (3/9/2014-9/9/2014)||29.20%||5.93%||23.27%|
Two years is a long time in the tech world, and Apple has gone to great lengths to expand its global distribution network, a fact that allows more consumers to buy its new iPhone with each form factor overhaul that occurs. The prospect of a new form factor also plays into many consumers' buy-or-wait decisions in the quarters prior to a new iPhone debut. Unless they've broken their smartphone, most consumers find it relatively easy to delay purchasing a new model for a few months, and the prospect of Apple releasing an exciting new form factor likely stacks the sales deck in favor an impressive initial sales burst with each major iPhone design overhaul.
There is, of course, an equally important disclaimer: Other company-specific and marketwide issues will play roles in how Apple stock trades. If these Chinese economy implodes, the coming months might not be the most enjoyable time to own equities as a general proposition. Specifically, Apple stock's repeating its past behavior this time around should be thought of as a likelihood, not a certainty.
Andrew Tonner owns shares of Apple. 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.