One of the biggest question marks for Apple right now is whether the iPhone 7 cycle will bring a return to growth after a weak iPhone 6s cycle. There is great disagreement on Wall Street about this, but one analyst said his confidence in a return to growth for the iPhone has increased. Also analysts have perused the company’s latest 10-Q filing and its purchase commitments with interest during this time when production on the iPhone 7 should be ramping.

iPhone 7 Pro

UBS raises Apple’s iPhone estimates

UBS analyst Steven Milunovich increased his estimate for iPhone units as he expects “moderate single-digit” growth in units in fiscal 2017. In his analysis, he looked at each year as a class of iPhones and estimated the percent of owners that upgrade in two years, three years or another number of years. He estimates that in order for Apple to see another unit decline in fiscal 2017, less than 40% of the fiscal 2015 base would have to upgrade in two years. If this happens, it would mean that the upgrade cycle lengthened significantly. Currently he estimates that between 50% and 60% of each previous iPhone class upgrades in two years.

The analyst said that even if just 41% of the fiscal 2015 base upgrades in fiscal 2017, it would mean a 17% increase in iPhone units in fiscal 2017. However, he adds that the worse the iPhone 7 cycle is, the better sales in fiscal 2018 will be, assuming that Apple manages to keep its retention rate high.

Milunovich sees Apple stock as being “inexpensive,” although he admits that there is a current lack of major positive catalysts for it. On the other hand, he sees limited downside because of the low valuation, especially taking into account the company’s massive cash balance and its GAAP earnings. He continues to rate Apple stock as a Buy with a $115 price target.

Apple’s purchase commitments rise

Apple’s 10-Q filing revealed a significant increase in purchase commitments this year, according to JPMorgan analyst Rod Hall. The company’s purchase commitments increased by about $5.5 billion sequentially in its third fiscal quarter, compared to the $2.7 billion sequential growth recorded in the year-ago quarter and $2.8 billion in the third quarter of fiscal 2014. Of course such a large increase probably means Apple is working on something big.

The company’s off-balance sheet commitments actually declined by $1 billion to $6.2 billion, which Hall said in his August 2 report demonstrates better management of those other commitments. He noted that the company had flagged about a $4 billion increase in off-balance sheet commitments for the third fiscal quarter, which he believes was for Samsung to produce OLED displays for the iPhone 7s or iPhone 8 (whichever name ends up being for the 2017 model). He added that this amount might have been partially netted off against other display commitments.

Additionally, Hall noted that Apple reported a 57% sequential decline in accrued warranty costs, bringing it to $380 million, which is the lowest level since the third quarter of fiscal 2012. He estimates that warranty cost per device declined from $13 in the second fiscal quarter to $7 in the third fiscal quarter.

Shares of Apple stock rose by as much as 1.16% to $105.69 during regular trading hours on Wednesday.