3 Ways Apple Can Turn It Around in 2016

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Following another weak day of trading Friday, Apple AAPL dropped below the dreaded "-20% from new highs" threshold and entered its own bear market. The stock is now down about 1.3% on the year, a rare sight for investors who have grown accustom to a company which has grown by an average of 28% each year over the last decade.

Also read:Apple Continues Slump

Luckily, the end of 2015 is near and Apple's rough year is almost over. However, it is important for Apple to shake things up in 2016 if it wants to avoid the same fate. But what options does the company have? We'll explore three ways that Apple might be able to turn its performance around in the New Year below.

1. Forget the Watch

One would certainly be hard pressed to say that Apple has a hard time "admitting its failures," simply because the company has so few. However, it does seem like Apple takes pride in its innovative culture and would not be quick to admit that one of its products flopped. And by now we know that the Apple Watch totally flopped.

If you watched the 60 Minutes special about Apple last night, you may have noticed a rather awkward moment between Charlie Rose and Tim Cook when Rose brought up the Apple Watch. While Rose was careful not to proclaim it as a flop himself, he did question whether the product needed "improvement." Cook casually avoided the question.

Also read:Apple Watch Not Compelling? Sales Decline 90%

So, the first thing Apple can do in 2016 is to move on from the Apple Watch. Its sales have absolutely plummeted since its launch and it seems like too much of a niche product to have a serious impact. Apple needs to focus on roping in new customers that don't already have iPhones, and the Watch is just not the product to do that.

2. Successful Television Launch

According to Bloomberg , Apple is hoping to launch its over-the-top TV subscription service in 2016. This has been rumored for a long time and it looks like we will finally be getting this service soon. With its brand name, Apple should be able to soar to the top of the streaming world and compete with the likes of Netflix NFLX and Amazon AMZN .

A subscription-based streaming service is a type of product that can appeal to non-Apple customers. As more and more people "cut the cord," over-the-top services will continue to grow. And based on the quality of what Apple typically releases, this service will probably function very well.

Also read:The Revolution Will Not Be Televised: The Death of Cable in America

If Apple has a product that can appeal to these people, who may or may not own any Apple products, it can make them first time Apple customers through the streaming service. First time customers can quickly become diehard customers. This is much more effective than a product like the Apple Watch, which really only works for people that already have iPhones.

3. Get in the Cloud

One of the worst things about Apple's weak year is that its massive tech rivals didn't suffer the same fate. However, the big tech winners-known as "MAGS," or Microsoft MSFT , Amazon, Google GOOGL , and Salesforce CRM -are all putting an emphasis on cloud computing at the enterprise level.

Also read:Which "MAGS" Stock Will Lead 2016?

Apple has great cloud technology and individual Apple users can utilize this with their iPhone, iPads, and Macs, but the company has always made enterprise a secondary concern. With cloud computing dominating at the enterprise level, it now seems foolish that Apple isn't in the ring with the other big players. With so many people in the business world using Apple products for personal use, it doesn't seem like the transition would be all that rough. This could be a big new market for Apple.

Bottom Line

Since its earliest inception, Apple has always been shaking things up. This mentality has fueled the company's consistent growth and made it the number one brand that it is today. With that said, Apple cannot to be stagnant now. The stock has had a weak year, and if Apple wants to bounce back it needs to innovate again.

Currently, Apple has a Zacks Rank #3 (Hold). Based on current estimates, we expect Apple to see earnings growth of about 6.5% in its fiscal 2016.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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