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Apple Set For Biggest Quarter in Five Years, But is It Poised for a Massive 2017?

Benjamin Rains

Apple Inc. AAPL is set to post its best quarter in five years with the iPhone maker’s stock skyrocketing so far this year. But does a massive quarter mean big things are coming for Apple in 2017, or is the major quarter just a continued positive burn from the Warren Buffett boost?

Apple reportedly sold 78.3 million iPhones in its first fiscal quarter of 2017, which ended on December 31. The technology giant’s first quarter, during the all-important holiday period, marked the first full quarter that the iPhone 7 and 7 Plus were on the market. The huge amount of iPhones sold helped Apple post all-time high quarterly revenues of $78.4 billion.

Apple provided revenue guidance of between $51.5 billion and $53.5 billion for its second quarter, which ended on March 31.

The company’s market value grew by $146 billion over the last three months. Apple is the biggest public company in the world, with a new market cap of $753.06 billion.

At the end of December, Apple’s stock was trading at roughly $116 per share. Since January, shares of Apple have gained nearly 25%, trading more than $10 per share above its previousall-time high of $132 per share in May 2015.

Apple’s stock is down 0.17% to $143.41 per share in early afternoon trading on Monday. Apple is currently a Zacks Rank #3 (Hold).

With the stock hitting new all-time highs and the company poised to record one of its strongest quarters in years, should investors expect Apple to make a major run throughout 2017?

Big 2017?

One of the biggest catalysts for Apple this year will be—as always—the performance of the iPhone.

The first-generation iPhone debuted in June 2007. Apple sold its billionth iPhone in Summer 2016. Since then, rumors have been flying regarding Apple’s next iPhone.

Speculative names for the new 10th anniversary iPhone include the iPhone “Edition,” “X,” or simply the iPhone “8.” The 10th anniversary iPhone is one of the most hotly anticipated Apple offerings in years. The newest iPhone is likely to make its debut in Fall 2017.

The 10th anniversary iPhone is rumored to represent the most major phone-to-phone jump for Apple in years. The next generation iPhone will feature a major redesign. Based on reports, the new iPhone could feature a glass body and an edge-to-edge OLED (organic light-emitting diode) display, but it might also cost a staggering $1,000.

Apple also plans to introduce its customary updated versions of the iPhone with the release of the tentatively named iPhone 7s and iPhone 7s Plus.

Aside from the new iPhone offerings, the best news for Apple and its investors is the massively aging iPhone install user base.

Some analysts are predicting that Apple could post record-breaking sales in 2017. The thought behind the massive sales numbers is the fact that there will be a huge demand for iPhone upgrades, even if customers don’t switch to the potentially expensive 10th anniversary iPhone. Apple’s iPhones normally run on a roughly two-year upgrade window.

According to BMO Capital Markets analyst Tim Long, there are now 700 million iPhones currently in use worldwide. Long expects the iPhone install base to grow 13% in 2017.

On top of the highly anticipated 10th anniversary iPhone and the huge wave of customers set to upgrade, Apple recently acquired popular automation app Workflow. The tech giant is likely to integrate the Workflow app with Siri moving forward. The integration will help expand the iOS ecosystem and improve app accessibility.

Buffett has also invested heavily in Apple in the last year, which rarely hurts long-term viability. As of February, Berkshire Hathaway Inc. BRK.A held roughly $7.74 billion worth of Apple shares.

Potential Problems

Apple is still an iPhone company at its core, so if its new iPhone fails to meet the lofty expectations, the company could be in trouble.

One of Apple’s biggest rivals, Samsung already uses OLED screens in its smartphones. Despite the fact that some of Samsung’s Galaxy Note 7 devices exploded, Apple’s South Korean rival owned roughly 20% of the global smartphone market in 2016, beating Apple by almost 5%. Like Apple, Samsung is also set to introduce its newest smartphone offering, the Galaxy S8, in 2017.

The company announced on Monday that it is dropping one of its biggest graphics chip makers, Imagination Technologies. Apple has apparently been “working on a separate, independent graphics design in order to control its products.”

Imagination’s technology has been used in the iPhone, iPad, iPod and the Apple Watch for years. Imagination’s stock, which trades on the London Stock Exchange under the ticker “IMG,” is down roughly 63% on Monday. A potential legal battle could ensue if Imagination tries to fight against losing its most valuable client.

Still, despite a few potential setbacks, Apple shipped roughly 60 million iPhone 6 units in 2016, making it the bestselling smartphone on the market. The iPhone 7 came in second at just over 50 million units. Samsung's Galaxy S7 Edge came in fifth place at roughly 25 million units.

It seems highly unlikely that one of the biggest American blue chips would fade away anytime soon, and a fall from the heavens in 2017 seems unfathomable.

Apple is set report its next official earnings on April 25.

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