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Wall Street remains optimistic about 'iPhone 7' & Apple's 2017 after Q2 declines

Analysts on Wall Street were pushing optimism after Apple's disappointing fiscal 2016 second quarter earnings, saying they expect that the company will continue to innovate and will return to growth over the next year.

iPhone sales fell to 51.2 million in the March quarter, down from 61 million a year ago. Sales and revenue also fell accordingly, marking the first time since 2003 that Apple didn't grow, and also the first time the iPhone saw a year-over-year sales decline.

Those results weren't exactly surprising, however —  Apple had already warned investors that iPhone sales would decline, and the results reported were in line with Apple's own guidance. Though they were disappointed, analysts weren't shocked by the results, and continued to express optimism for Apple in the near future. Highlights of their commentary, as provided to AppleInsider, follow.

Cowen and Company

Analyst Timothy Arcuri believes investors will look back on Apple's current situation as the "last estimate cut" before things take off with the anticipated launch of the "iPhone 7." He believes that device will serve as a bridge to a "new cycle of innovation" in 2017.

Acuri maintained his "outperform" rating for shares of AAPL, though he adjusted his price target downward from $135 to $125. He also noted that he sees the risk-reward ratio at greater than two-to-one upside with shares trading below $100.

Looking forward to 2017, Arcuri is excited by rumors of an iPhone with an all-new form factor, including a glass back and OLED display. He believes a shakeup for the iPhone lineup could create an iPhone 6-like upgrade cycle, particularly if Apple can make major improvements in battery life.

Wells Fargo

"Now would be the time to get more bullish on AAPL shares," analyst Maynard Um wrote. His analysis suggest investors should be excited about the "iPhone 7" product cycle, as "non-S" iPhone upgrades typically generate more interest with consumers.

Specifically, he's bullish on the "iPhone 7" as he expects two-year contracts for iPhone 6 buyers will be coming to an end, and consumers who are looking to upgrade.

"We reiterate our Outperform rating as we believe the iPhone 7 growth potential is now being underestimated," Um said.

Wells Fargo has held a "valuation range" of $120 to $130 for AAPL.

Piper Jaffray

Analyst Gene Munster believes shares of AAPL will rebound in 2016, and he too expects the iPhone to return to growth in the upcoming December quarter. Like Um, Munster spoke of an "inherent upgrade base" in the waiting as two-year contract subsidies expire.

Munster's forecast calls for 1 percent unit growth for the iPhone 7 cycle compared to the iPhone 6 cycle. That translates to 11 percent year-over-year growth from the iPhone 6s.

Piper Jaffray has maintained its "overweight" rating for Apple, and the company remains its top pick for investors in 2016. However, the firm did cut its price target from $172 to $153.

RBC Capital Markets

Amit Daryanani also maintained an "outperform" rating for Apple after its March quarter results sent the stock tumbling. Though he admitted Apple's June quarter guidance was "exceptionally disappointing," he believes valuation for the company provides support for the stock in the mid-90s in the near term, suggesting shares won't go far below that threshold.

With tough iPhone 6 comparisons almost out of the way, Daryanani believes apple should return to growth in the December quarter on the strength of an "iPhone 7" launch. He also expects to see a modest increase in gross margins that should enable the company to drive earnings per share growth.

Though he continues to believe investors should buy in to AAPL, Daryanani trimmed his price target on shares of the company from $130 to $120.

Macquarie Securities

Though iPhone guidance remains weak for the current June quarter, analyst Ben Schachter found a bright spot in Apple's services business, which saw revenue increase 20 percent last quarter.

Schachter believes the services business accounted for 23 percent of Apple's gross profits in the March quarter, and will comprise 25 percent of the company's fiscal year 2017 gross profits.

Like others, Schachter believes Apple's comparisons will ease in the December quarter, putting the company in a position to restimulate growth. He also believes Apple could spur innovation through a major acquisition.

"Tim Cook's commentary suggested an Apple that is more open to large acquisitions to help it innovate in current, and potentially, new categories," he wrote. "We will not be surprised to see a more acquisitive AAPL in the future."

Macquarie has maintained an "outperform" rating, but trimmed its price target on AAPL from $117 to $112.

Brean Capital

AAPL stock may face "additional wrinkles" in the near future, analyst Ananda Baruah believes. But he also believes that by August, the company could once again be in a position to beat revenue and meet gross margins expectations.

Still, Baruah slashed his Apple price target from $155 to $125. Brean Capital has, however, maintained a "buy" rating for shares of the company.