Analyst: There's still opportunity in Apple, despite China fears

Though spillover from a stock sell-off in China could stoke concerns for Apple investors, one top analyst said Monday he will maintain he outperform rating for the technology company.

"With only 30 percent-plus of Apple's user base upgrading to iPhone 6/6s to date, there is a massive green field opportunity to further penetrate its unrivaled customer base over the coming years, with China remaining the main fuel in the tank for Cupertino going forward despite lingering growth fears," wrote Daniel Ives, managing director and senior analyst at FBR Capital Markets.

Ives' somewhat optimistic research note came as major U.S. stock indexes dove over 2 percent Monday morning, following a 7 percent plunge in Chinese stocks after a key indicator showed contraction in the Chinese manufacturing sector.

Shares of Apple also tumbled almost 2 percent at one point Monday. The turbulence in the Shanghai composite struck Apple at the epicenter of its fastest-growing market: The company saw an 84 percent sales increase in greater China in the 2015 fiscal year.

Despite Ives' headline calling a "white knuckle period" ahead for Apple, he said Wall Street onlookers may have set the bar just low enough for Apple to succeed in coming quarters.

"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 wrote in a research note. "Apple is poised to benefit from pent-up consumer demand/mega product cycle heading into September 2016, in our opinion."

Apple's highly anticipated new flagship product, iPhone 7, expected to debut this year, comes on the heels of what Ives calls "a miserable, dark period" for the company.

Slowing revenues at key suppliers, a lukewarm upgrade cycle and and serial scares in China have cast a shadow over the stock in the past six months, leaving the shares down over 4 percent over the past year. That's on top of a difficult business environment for smartphone suppliers worldwide, as the market becomes more saturated and demand reportedly softens.

But as Ives' note points out, Apple has an ample cushion of cash to ride out these changes in the form of acquisitions, research and development and returns to shareholders: The company reported a total of $206 billion in cash and cash equivalents in its latest annual report.

"[CEO Tim] Cook and Cupertino are well aware of these challenges ahead, which speaks to Apple's product expansion into enterprise, wearables, virtual reality, streaming, and autonomous cars down the line," Ives wrote. "We continue to strongly believe that while not in Apple's typical gold-standard playbook over the years, Cook & Co. could look to do some larger, strategic technology acquisitions to further broaden the company's consumer/enterprise footprint in 2016."

Still, even Ives has adjusted his expectations for the technology giant. He announced Dec. 23 he had lowered FBR's total iPhone shipment forecasts and price target for Apple.

Disclosure: FBR is a market maker for Apple. Apple is an investment banking client of FBR.