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Is Apple Heading Into a ‘White Knuckle Period?’

January 4, 2016, 9:55 PM UTC
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Apple may be in for some trouble, but things will eventually get better, one analyst says.

In a note to investors on Monday, Daniel Ives, an analyst with FBR & Co., says that investors will be forced to deal with a “white knuckle period” in the coming months. He argues that while Apple’s investors have faced “a miserable, dark period over the past few months,” there are no signs of it slowing down anytime soon.

“With panic around China yet again rearing its head and [iPhone] 6s demand less than stellar, many on the Street are now worried that Apple’s growth story is in the rearview mirror and tougher days are ahead as China remains the main fuel in Apple’s growth engine going forward,” he wrote to investors.

Indeed, there is growing concern among investors and analysts that, perhaps, Apple is not as healthy as it once was. As Ives notes, China is Apple’s biggest market, accounting for nearly a quarter of its $51.5 billion in revenue in the last-reported quarter. Meanwhile, its iPad business has been in decline and there have been nagging rumors that demand for the iPhone 6s is not as strong as Apple had anticipated.

Last month, several analysts, including those at Morgan Stanley, JP Morgan, and Barclays, said that Apple had reduced component orders on the iPhone 6s and iPhone 6s Plus. On average, analysts have predicted a year-over-year iPhone shipment decline of 15% in the quarter ending in March.

For his part, Apple CEO Tim Cook has not shied away from the naysayers’ comments, arguing last year on several occasions that the iPhone is performing above expectations and even his company’s iPad has a longer “runway” than some may believe.

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Still, Cook is facing some headwinds. The Dow plunged more than 400 points on Monday over concerns that the Chinese market is slowing and its manufacturing industry is grinding to a halt. If China is in trouble—a belief that is disputed by economists—it could spell bad news for Apple, Ives and his fellow analysts argue.

Meanwhile, Cook and his team are expected to increase iPhone shipments, despite an unfavorable hardware comparison. The iPhone 6, after all, was a major upgrade that featured a new design and bigger screen than the iPhone 5s. That resulted in massive demand and record-breaking revenue for Apple. The iPhone 6s is a nominal upgrade over its predecessor, and analysts have acknowledged that the iPhone 7, which is rumored for this year, is the major upgrade consumers are waiting on.

Looking ahead, however, the white-knuckling at Apple (AAPL) won’t last long, Ives says. While he acknowledges that Apple is undergoing some turbulence, he believes the market’s generally bearish view on Apple’s future (shares are down 17% in the last six months) is overblown.

WATCH: For more on iPhone sales, check out the following Fortune video:

Ives says in his note to investors that Apple likely had a “relatively strong” holiday quarter, and while it may have to weather some downbeat quarters in 2016, “the mega iPhone 7 product cycle” set to kick off in September could be enough to turn things around.

“While [iPhone] 6s demand has not been stellar out of the gates relative to bullish Street expectations, we believe this near-term product transition period will ultimately lead to brighter days ahead on the shoulders of the flagship iPhone 7 release,” Ives writes. He estimates 30% of iPhone owners have upgraded to an iPhone 6 or iPhone 6s, providing the company with “a massive green field opportunity” to sell boatloads of iPhone 7 units.

“The reality is that this interim product cycle should still help Apple hit roughly 220 million+ iPhone unit sales for 2016, a still commendable achievement for a “S” product cycle, and thus help lead to the drumroll for a robust 250–255 [million] iPhone unit sales number in 2017 on the heels of a much anticipated iPhone 7 cycle,” Ives wrote.

MORE: About Those Rumors of Apple Supply Chain Cuts

But what about the rest of Apple’s business? According to Ives, there’s a possibility that Apple may try to jump-start some of its slower divisions by using its more than $200 billion in cash to fund an acquisition. While he wouldn’t say which companies may be in Apple’s crosshairs, he thinks the company could make “larger, strategic technology acquisitions” this year to boost its “footprint” in consumer and enterprise markets.

In other words, those knuckles may get some relief sooner than some think.

Apple declined comment.