Apple Inc. (NASDAQ:AAPL) will be happy to put 2016 behind it. Yes, AAPL stock registered double-digit gains and slightly outperformed the market (with one day of trading to go in 2016), but the year was hardly a stellar one.
Sales are down in key product lines like the iPhone. Its long-awaited MacBook Pro revision faced a barrage of criticism. The iPhone 7 was derided for looking too much like the iPhone 6 and for lacking a headphone port. And to cap it off, AAPL is closing out 2016 facing a series of issues with iPhone 6 batteries.
And while Apple inc. has struggled, opponents have made hay.
Microsoft Corporation (NASDAQ:MSFT) has seized the premium PC mantle with its Surface Studio and Surface Book. Amazon.com, Inc. (NASDAQ:AMZN) made an end run around Siri and HomeKit to make the Alexa-powered Echo smart speaker a contender to control the smart home. Alphabet Inc. (NASDAQ:GOOGL) entered the premium smartphone market with its Android flagship Google Pixel Phone.
AAPL doesn’t necessarily need to detonate everything and start all over from scratch, but it could use a turnaround or two in key categories.
Apple Did OK in 2016, But …
Again, short of something crazy happening Friday, Dec. 29, AAPL stock will have returned at least 10% for 2016. That’s not bad. In fact, it’s downright great compared to last year’s 3% losses.
Then again …
In 2014, AAPL returned 47%. In 2012, it was about 25%. Don’t forget the heady days of 2009, when the iPhone was gaining in popularity and rumors were flying that the company was about to release a new tablet device (the iPad would be unveiled the following January) — and the market was rebounding out of the cellar. Apple stock gained 115% that year.
AAPL is spending increasingly more on stock repurchases and dividends, so there’s less of an expectation of rampant growth … but there’s still some sort of expectation for outsize growth. Apple is, after all, a consumer tech company.
And it’s not just stock performance. Apple needs to return to form in many aspects, such as re-emerging as an innovator and a designer of world-class premium products.
To accomplish these goals, there are three key objectives that Apple needs to nail in 2017.
#1: The iPhone 8 Needs to Be Hit
There are no two ways about it: The single most important product release in 2017 for AAPL is the iPhone 8.
Sales of iPhones are Apple’s single largest source of revenue — 60% of Apple Inc. revenue in the last quarter. If the iPhone 8 is a big hit, it will reverse the slide in sales, and AAPL stock will be off to the races.
To get there, Apple needs to release a product that wows consumers. It must look nothing like the iPhone 6/6s and 7 — and the Android rivals that have adopted a similar form factor. It has to make them forget about headphone jacks and unreliable batteries.
The iPhone 8 needs to have the must-have appeal that makes iPhone owners clamor to upgrade, with line-ups outside Apple Stores once more.
At this point, rumors have AAPL going to an all-glass iPhone 8 with a curved display and wireless charging.
It’s a start.
#2: Apple Needs to Win Back the Mac Faithful
The Mac is no longer as important as it once was to Apple, but computers are still the company’s third largest line of business. And in 2016, Mac fans felt not just ignored, but slighted.
Some models like the Mac Pro and Mac Mini haven’t been upgraded in years. And when Apple did release a new MacBook Pro, it seemed to have gone out of its way to anger many of its core customers by eliminating all legacy ports in favor of USB-C. The new TouchBar feature generally received a shrug from professional users, while higher cost and poor battery life continue to generate complaints.
Rubbing salt in the wound(s), in 2016, AAPL also discontinued the computer monitor and Airport wireless router lineups that have been popular with Mac owners for decades.
In 2017, Apple Inc. must do more than offer a discount on USB-C dongles. The company needs to update its Mac desktops — the Mac Pro, Mac Mini and iMac — with new processors. It can (and should) add USB-C ports to its computers, but it needs to leave a legacy port or two instead of arbitrarily eliminating them all and forcing customers to buy new peripherals or clumsy adapters.
A 2017 MacBook Pro revision with a price cut, improved battery — and maybe even a retreat to adding one old-fashioned USB 3.0 port (although that move may be technically impossible at this point) would also go a long way.
#3: Apple Needs to Refocus on the Home
Apple was a home tech pioneer with the 2007 Apple TV, but despite a wealth of tools at its disposal — including that Apple TV business combined with iTunes video streaming, HomeKit, Siri and its Beats Electronics audio gear — the company sputtered in the home in 2016.
In 2017, Apple Inc. needs to get on the 4K video streaming bandwagon with iTunes and the Apple TV or it’s going to seem hopelessly out of sync with what consumers expect, especially when it charges a premium for its non-4K gear.
AAPL also needs to get Siri into a Beats speaker before the Amazon Echo, and competitors from Google and Microsoft lock up the smart home.
Of course a company like Apple has other balls in the air as well. In 2017, a thinner Apple Watch with improved battery life, a refinement of the iPad Pro line-up or new Apple Music features are possible. But these product lines all received big upgrades in 2016. Autonomous car plans are still underway and could pay off big, but not next year.
Bottom Line for AAPL Stock
If 2017 is to be a year where consumers are excited about the company and its products, and Apple stock has another one of those historical runs, the company needs to nail the iPhone 8, win back Mac fans and re-assert its presence in the connected home.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
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