Analysis: Apple expected to reveal Apple Watch 2 and waterproof iPhone 7 with no headphone jack

A recent article in Fortune.com predicted that sales in the all-important holiday quarter are predicted to be well below the 75 million iPhones shipped the year earlier. Additionally, Apple’s stock price has declined somewhat this year compared to last year (one per cent).

2017 shipments “remain highly uncertain,” Abhey Lamba, analyst at Mizuho Securities, wrote last week: “Shipments will highly depend on the sell-through data and adoption/availability of OLED displays for the next generation phones."

While investors have accepted a weak upcoming product cycle, the innovation expected in the iPhone 8 still seems to be of concern as many of the new features expected are already in many Android phones. “The iPhone 7 is widely expected to introduce only incremental innovation with the iPhone 8 driving a Super Cycle (OLED, wireless charging, etc. expected),” Kulbinder Garcha, an analyst at Credit Suisse, noted.

KGI Securities analyst Ming-chi Kuo is perhaps the dean of the college of Apple rumors thanks to his close ties with the Asian manufacturers who actually build the iPhone and most of its components. After numerous earlier reported leaks from Kuo, he added a slew of final details on Tuesday.

“Recent run-ins with the FBI, China government, EU and short sellers has made Apple the ‘Jason Bourne of Tech',” wrote Brian White, an analyst at Drexel Hamilton, on Tuesday. “Similarly, just as the market calls for Apple’s undoing, the company emerges even stronger.”

“Our research in Asia highlights that Apple will remove the headphone jack by leveraging the Lightning connector,” White explained. “Although likely a contentious issue with iPhone users at first, we believe this will soon be forgotten and makes room for an additional speaker with enhanced sound quality.”

The Fortune article notes that Apple may replace its current space gray color with two new black options: one that is “dark black” and another shinier sheen Kuo refers to as “piano black". Additionally, Apple is expected to bump up the minimum storage space on the cheapest iPhone 7 to 32GB from 16GB in last year’s 6S model. Kuo yet again confirms that Apple will remove the industry-standard headphone jack and will include a set of headphones that connect to the phone’s proprietary Lightning connector that is also used for recharging. Apple is also expected to include a dongle enabling any standard pair of headphones to connect to the Lightning connector as well.

“Waterproof will be a big selling point from AAPL—though of course Samsung is already there—further enabled by the elimination of the headphone jack and integration w/the lightning port (maybe angering some who charge the phone while listening to music, but otherwise a positive development),” Cowen & Co analyst Tim Arcuri wrote on Tuesday.

With the iPhone 7 upgrade so close, some analysts are looking ahead to next year when Apple is rumored to have a much more significant upgrade on deck, particularly with a new higher-definition OLED screen.

Apple is also widely expected to introduce an updated version of the Apple Watch on Wednesday. The first Apple wearable, which hasn’t been updated since it arrived in April, 2015, has experienced declining sales this year. This has some analysts predicting better performance ahead as Apple will be able to beat low expectations.

“We expect Apple to update Apple Watch, adding native GPS and upgraded Wi-Fi functionality,” Andy Hargreaves at Pacific Crest Securities wrote last week. “The addition of GPS is the most important, in our view, as this is critical to many fitness tracking applications, which remains among the most in-demand features in wrist-worn wearables. Despite the potential for GPS to drive growth in Apple Watch unit volume, we continue to believe Apple will have to expand its wearables lineup with lower-functioning devices at lower price points to fully capture the opportunity.”