Apple has had a great year, outpacing the general market and remaining the most valuable company by market cap.
But demand for the iPhone may be slowing and its services business could fail to launch, according to a Mizuho analyst.
Apple has had a great 2017, growing its share price by about 50% and while adding $275 billion to its market cap.
Apple didn't get there by accident. In 2017, it released a brand new iPhone, Apple Watch, and iMac, in addition to a number of new software products. The company doesn't look like it's slowing down in 2018 either. For Apple investors, whittling the company's wide-ranging initiatives down to just the most important can be a challenge.
But, according to Abhey Lamba, an analyst at Mizuho, there are just two important factors to Apple's success in 2018.
Watch how the iPhone X demand plays out
The iPhone X is Apple's much-hyped flagship phone. It has set a high bar for other phone makers with a gorgeous, bezel-less display, FaceID unlocking, and augmented reality features.
Lines for the phone were predictably long at launch, and delivery dates for online orders initially stretched weeks past the planned date. Watching how this strong launch demand stretches into 2018 should interest Apple investors, Lamba told Markets Insider.
Some analysts say the high price point and lack of features that users actually care about could hinder the phone's overall performance in 2018. Steven Milunovich, an analyst at UBS, has said that speculation about a "supercycle" for the iPhone X was overblown. Lamba is less sure but says he will be watching sales of the phone closely, especially in the first quarter next year.
Will Apple's services continue to grow?
CEO Tim Cook has said Apple's services business would rival a Fortune 100 company by 2017, and it largely has, bringing in $29.98 billion in the most recent fiscal year. As its primary business of selling iPhones starts to run out of ways to expand, Apple could look to services as its next area for growth. Lamba said that selling iPhones is more of a "replacement business" now, and services are just one way the company could make up for the expected slowdown in revenue growth.
The iPhone still represents a huge part of Apple's business, and will likely continue to do so in 2018. But Apple has said it wants to spend $1 billion on television content in the coming year and just bought music identification app Shazam for an estimated $400 million. The company's payments and cloud business are part of its services offerings too, and Lamba says it will be interesting to watch the moves the company makes in that sector in 2018.
It will be "extremely hard" to match the legendary performance of the iPhone though, Lamba said.
Lamba is cautiously optimistic on Apple. Its competition in the phone business is only getting tougher, and building another cash cow like the iPhone will take time and skill. That caution is what led Lambda to be one of the few analysts on Wall Street without a "Buy" rating for the company.
Lamba is neutral on Apple with a price target of $160, which is about 8.5% below its current price of $175.