Stock Focus: Apple (NASDAQ AAPL) To Be Helped by Easy iPhone 6 Upgrade Features

Apple Inc. has scheduled a big event for Tuesday, presumably to show off the iPhone 6. Fans will undoubtedly go ga-ga for the new smartphone, but just how many of them will upgrade to the new model? Bernstein analysts put together a list of the different ways people could upgrade without shelling out a ton of cash for the new iPhone. Bernstein analysts see a greater differentiation between the iPhone 5S and iPhone 6 than between previous models.

In a research note dated Sept. 5, 2014, analysts Toni Sacconaghi, Jonathan Cofsky and Eric Garfunkel said they expect a 9% increase in iPhone units in the 2015 fiscal year. That’s even though the maturity of the high end of the smartphone market is increasing. The number of units declined modestly in the first halves of the 2013 and 2014 calendar years.

However, they have four reasons for assuming the 9% iPhone growth rate.

Apple Inc (NASDAQ AAPL): iPhone 6

First, they assume that the high end of the smartphone market will grow by 2%, which would add 3.3 million units to Apple’s growth. Second, they aren’t assuming that Apple adds any more carriers, but they do assume that another quarter of sales on the China Mobile network in the 2015 fiscal year will provide a meaningful benefit.

Third, they’re assuming 200 basis points of market share growth, which amounts to about 3.6 million units, due to consumers switching from Android to the iPhone 6. And fourth, they’re expecting to see a one month decline in Apple’s replacement cycle, which would add about 5.5 million additional units.

They note that this last assumption is probably the biggest because it could have the greatest effect on how many iPhone units Apple ends up selling in the beginning.

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Apple Inc financial news (NASDAQ AAPL)

The Bernstein team notes that in the six quarters before the iPhone 6 announcement, Apple will have sold about 220 million units. They say typically only a “modest percentage” of that number would upgrade to the newest model for a number of reasons.

They cite the high cost of buying a new phone when using a prepaid wireless provider. There are also restrictions on upgrading for those who are on postpaid plans. Nonetheless, they say even a “small percentage uptake” in the number of people who upgrade could significantly increase Apple’s numbers.

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