By Don Reisinger
July 5, 2016

If you think this could be a bad year for Apple and the iPhone, you’re not seeing the bigger picture, an analyst at Cowen & Co. says.

In a research note sent to investors recently and obtained by Fortune, Cowen & Co. analyst Timothy Arcuri said that “the focus on iPhone 7 is obscuring a powder keg.” He added that investors should buy Apple (AAPL) shares in anticipation of what could be a huge 2017 for the company.

In his note, Arcuri acknowledged, like many other analysts, that iPhone sales this year could be rather soft. In fact, he believes that this year’s launch, presumed to be known as the iPhone 7 and iPhone 7 Plus, will garner 75 million unit shipments this year, which is about on-pace with the iPhone 6s line from last year, he says. However, Arcuri did a bit more digging and found that next year could be an explosive year for Apple, as a huge number of iPhone owners look to upgrade to whatever the company has planned for 2017.

“Assuming iPhone 7/7+ units are about flat with iPhone 6S/6S+, the portion of the total active iPhone installed base that is [greater than] two years old is set to hockey-stick from [approximately] 33% today to [approximately] 43% in the next four-to-five quarters,” he writes. “This represents growth in older-than-two-year-old units of [approximately] 60-70 million by next June. In other words, the entire growth of the base—and then some—will be from older units that are ripe for upgrades, especially to a new OLED-enabled form factor.”

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In essence, Arcuri, whose note was earlier reported on by Business Insider, expects the number of customers looking to upgrade to a dramatically improved iPhone to grow significantly in the next year. And at that time, he says, Apple will pounce with what he calls a “super cycle” that will prompt all of those who own aging iPhones to upgrade to the new device.

“Maybe the reason why the iPhone 7 is not a big design innovation is because [Apple] realizes the aging dynamics of the base and saw this coming years ago, choosing to save the true cycle of innovation for when the base would be incredibly ripe,” Arcuri writes.

For its part, Apple has remained silent on its plans, but that hasn’t stopped a countless number of rumors from hitting the Internet about its next steps. Those rumors suggest this year’s iPhone will come with only minor design upgrades compared to the iPhone 6s launched last year. However, the device could eliminate the headphone jack, which would represent a major departure from the iPhone designs that have launched since 2007.

Those reports have come in tandem with rumors that Apple has big plans for next year’s 10th anniversary of the iPhone. That device, several reports have said, could feature an all-glass enclosure and for the first time in Apple’s history, have an organic light-emitting diode (OLED) screen instead of an LCD.

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Several reports have criticized the move, saying that Apple has always released major upgrades every other year and left its smaller updates, the “S” models, for the interim years. However, they say Apple is moving to a three-year lifecycle now, due to slowing innovation on the component side.

Arcuri, however, suggests Apple’s move might be intentional. The company, he believes, knows that there is a much larger group of prospective customers who would be “ripe” to upgrade next year, and it might not want to sour that opportunity by launching something major this year. Instead, Apple will take a relatively flat 2016 and prepare itself for a major 2017.

There’s another data point that Apple might be examining: How long it takes iPhone owners to upgrade. According to a report earlier this year, that upgrade lifecycle has extended and iPhone owners are holding onto their devices for longer. That, coupled with the data Arcuri brings forth, suggests 2017, and not 2016, really is the “powder keg” Apple will use to send its iPhone back into orbit.

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