Apple shares opened above $100 today after spending most of the last five trading days in double digits, but the stock is back under $100 again as analysts continue to defend the iPhone maker and promise a healthier 2016. The biggest issue is signs of weak iPhone demand as a result of reported supply chain cuts. However, analysts are urging investors to look past the soft iPhone 6s cycle and anticipate a stronger iPhone 7 cycle starting later this year.

Apple

To Apple from China with love

It seems that since analysts haven’t been able to convince investors to stop worrying about the iPhone build cuts, they’re now attempting to placate them with China sales. It’s true, there are signs that Apple is capturing the massive Asian market in a big way, but that might not be enough to keep investors pleased.

The next big catalyst for Apple shares is the company’s next earnings report, which is scheduled to be released on Jan. 26 after closing bell. That report will finally bring either relief or confirmation of the market’s worries. It will also likely bring guidance for the March quarter, which may be the biggest concern of all.

Concerns about March

In a report dated Jan. 13, FBR & Co. analyst Daniel Ives explained that investors are specifically concerned about iPhone demand for the March and June quarters. On the earnings call later this month, Wall Street will be anxiously waiting to hear what management has to say about China and guidance for the next two quarters. He believes that the iPhone is indeed doing well in China and that sales in the U.S., Europe, the Middle East, and Africa are causing most of the issues.

The analyst explained that the issues of soft iPhone 6s demand, negative headlines from China, and an Apple Watch growth trajectory that is back-end loaded have combined to create the “perfect storm” for Apple. He believes that this combination of problems is causing many investors to dump the iPhone maker’s stock until demand gets better.

However, he also reminds investors that this same story has happened before with the iPhone 5s cycle. He believes that management might just “rip off the Band-Aid” by providing a weak outlook for March, possibly the first year over year decline since the launch of the first iPhone in 2007.

Countdown to the iPhone 7

At this point though, Ives thinks it’s more prudent to just forget about the iPhone 6s and instead focus on the iPhone 7. He thinks Apple could sell at least 240 million units with the iPhone 7 cycle in fiscal 2017, returning to growth in the high single digits with this year’s iPhone lineup. As many others have noted, only about 30% of the installed base has an iPhone 6 or iPhone 6s, so there are still huge opportunities in the area of upgrades. Interestingly, he sees China has still “the main fuel in the tank” for Apple from now on and that this should help boost the iPhone 7 cycle.

After this month’s earnings report, the FBR analyst expects Wall Street to rerate Apple shares higher in anticipation of the iPhone 7 later this year. Also he expects sales of the Apple Watch to keep improving this year. Further, he believes the company is planning a major increase in its share repurchase program.

Acquisitions on tap?

Ives also mentioned acquisitions, suggesting that Apple might do something out of the ordinary and buy some bigger targets that what it usually acquires for the purpose of expanding its footprint in the consumer and enterprise arenas this year. He didn’t name any potential targets specifically, but his report comes the same week as a number of rumors are swirling about Time Warner.

Media outlets have been reporting that activist investor Carl Icahn has been building a stake in Time Warner, possibly for the purpose of pushing for a sale or spinoff, although he has flatly denied those reports. Today we heard that Time Warner is facing pressure from some shareholders and that Eddy Cue, one of Apple’s top executives, is watching this story closely because the iPhone maker might be interested in buying Time Warner to turn its rumored streaming TV service into a reality. None of these reports have been officially verified, however.

Apple shares fell by as much as 1.96% to $98.05 per share during regular trading hours today.