Here's a theory for why Apple's stock has been getting battered -- and when it will end

Apple stock has been on a steady decline over the past several weeks. It was down by about 2% on Wednesday (although now it’s back up by 1.4%), and share prices have fallen by ~17% since the end of July.

There’s no clear reason for the drop, but Piper Jaffray analyst Gene Munster has one theory about what could be impacting Apple’s stock.

According to Munster, investors are likely worried about Apple’s presence in China. The People’s Bank of China devalued its currency this week, and the yuan fell by 1.9% against the dollar. There’s a lot of uncertainty around how this could affect Apple.

China’s devaluation will likely increase production costs for Apple because it pays its local staff in US dollars. It’s also a signal that the Chinese economy is in trouble, which is bad since China is one of Apple’s biggest markets.

“I think it’s a classic fear of the unknown,” Munster told Business Insider. “In this case specifically it’s the fear of what’s happening in China. Investors appear to be concerned about what the impact is from China, and if that ends up translating to more broader concerns or a slowdown from consumers,” Munster said.

Here’s a chart from Yahoo Finance that shows how Apple’s stock has fluctuated since the end of July:

But that’s likely to change soon, as Munster says there are three key factors that could ease investors’ concerns and positively impact Apple stock over the next month and a half:

  • Apple is said to be holding an iPhone event in September. “That in itself isn’t a catalyst because everyone knows the event is coming,” Munster said. “But any sort of commentary about how [Apple] feels about the iPhone franchise is most likely going to be positive. So that’s a catalyst.”
  • Carriers have shifted away from two-year contracts to plans that let you pay your phone off in monthly installments. This allows people to upgrade sooner and more frequently, and Munster thinks we’ll see the affects from those early upgrades soon. “It starts to have a compounding positive impact in the December and September quarters,”Munster said. “And we think that can add 5% to overall iPhone units over the September and December quarters versus the Street.”
  • Once Apple’s next iPhone comes out, investors will start thinking about what’s next. Munster says that after Apple unveils the iPhone 6S, people will start to think about the iPhone 7. “The stock tends to do better in anticipation of full cycles,” he said. “So our thinking is, while we don’t know what impact China is going to have with the consumer, we do feel that these other catalysts outweigh the negative aspect of China and remain optimistic.”

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