A child grasps a new Apple Inc. iPhone 6s Plus at an Apple store in Palo Alto, California, U.S., on Friday, Sept. 25, 2015.
David Paul Morris — Bloomberg via Getty Images
By Aaron Pressman
August 16, 2016

Shares of Apple have rallied 13% since the company reported better-than-expected results for its most recent quarter on July 26.

Bernstein Research analyst Toni Sacconaghi thinks the stock can go even higher, from its current price of $109.38 to $125 or more. That’s based in part on his analysis that the company is undervalued compared to most other tech stocks and his forecast that Apple will sell 46 million iPhones next quarter and 219 million over the following year.

But the long-time Apple analyst, writing in a research report on Tuesday, does see one potential risk in the company’s upcoming quarterly forecast.

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In late October, Apple (aapl) will report its fiscal fourth quarter results. There’s not much expected from those three months, as investors don’t expect new iPhones to go on sale until the last week or two of that quarter. Sacconaghi’s 46 million prediction would imply a 4% drop from a year earlier, the third consecutive quarterly decline.

But in its October quarterly report, Apple will also give guidance about what it expects from the holiday quarter–by far the most important period of the year for iPhone sales. And although Apple itself won’t forecast iPhone sales specifically, analysts will quickly calculate an implicit iPhone forecast from the usual numbers Apple does provide.

And if the implied forecast looks to be under 70 million iPhones sold, look out below, warns Sacconaghi.

“We note that the biggest wildcard in any iPhone cycle is the magnitude of units sales in the December quarter, which has varied considerably over time and ultimately dictates demand for the entire cycle,” the analyst wrote. “To that end, we believe that December quarter revenue guidance implying 70 (million) iPhones or fewer, which might point to only about 200 (million) iPhones sold during FY 17 (vs. consensus of 221 (million)), would likely be viewed worrisomely, particularly if weakness appears to be driven by China.”

If Apple’s guidance looks weak, the stock price could drop back down to about $90 a share, Sacconaghi says. But the more likely scenario is a stronger forecast and the stock rising to $125 or more, he adds.

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