Apple's iPhone 6: Will a larger screen really lead to a replacement boom?

Apple's iPhone 6: Will a larger screen really lead to a replacement boom?

Summary: Analysts are betting that an iPhone 6 with a larger screen can solve Apple's Samsung issue and grab more customers and earnings power.

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Apple's iPhone 6 is likely to have a screen pushing 5 inches and that will lead to a big replacement cycle that may poach customers of Samsung. That theory is what has analysts getting wound up about Apple's earnings prospects.

In a research note Tuesday, Pacific Crest analyst Andy Hargreaves raised his price target on Apple shares to $635 and upgraded the stock. Hargreaves take is that a larger iPhone will drive a strong replacement cycle. He said:

We believe Apple can sell a 4.7" iPhone at a subsidized price of $299, which should generate incremental gross profit on replacement sales and attract new customers that had previously purchased Android phones specifically for a larger screen. If 35% of iPhone customers choose a larger iPhone when they upgrade and Apple is able to capture 10% of the large-format Android market, we estimate it could add $4.00 to our fiscal 2015 earnings per share estimate.

And Hargreaves isn't alone. Other analysts are all starting to salivate over an iPhone 6 replacement cycle. Despite the success of the iPhone 5s it's not to spot iPhone 4s devices in the field. Those older iPhones will move to the iPhone 6 level and a larger screen.

iphone replacements

 

Jefferies analyst Peter Misek said in a research note:

We continue to believe the iPhone 6 will be a significant product cycle as it will fill Apple's "~5-inch" product gap. Our checks also indicate that initial Samsung GS5 monthly builds will be below initial GS4 builds, but the overall unit target for GS5's lifetime is the same as the GS4. We believe the combination of pent-up demand for a larger iPhone and possibly less intense competition from Samsung bodes well for the iPhone 6 launch.

Is the chorus of analysts right about the iPhone 6? Probably. As noted before, the Android launches of late have been lackluster. Apple just doesn't have to do much with the iPhone 6 beyond offering a larger screen. Other improvements are likely to be gravy.

On the consumer and enterprise side, it's likely the iPhone 6 will spur a replacement cycle. Keep in mind that Apple is the top mobile dog in the enterprise, but Samsung and Android are making headway. A larger screen is likely to cement Apple's iOS positioning for a few more years.

Topics: Mobility, Apple, iPhone, Smartphones

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  • A larger iPhone display screen alone wouldn't suggest a sales boon 4 Apple.

    However, interconnectivity possibilities with rumored wearable tech, integration with CarPlay, enhanced camera subsystems, increased onboard memory storage capacity, perhaps much faster SoC chipsets might be enough to enhanced a net sales increase.
    kenosha77a
    • But when talking replacement "boom"

      would those thing entice the average, everyday user, or would a larger screen boost sales as it may appeal to a far larger audience?

      I know my wife would like a bigger screen then what she has on her iPhone4 (especially after using my phone now and again which has a larger screen), and the iPhone 5 would do nicely, but for iPhone 6, I'm guessing if they had to choose between the two (your list or the screen) I wonder if the screen would win out?

      Not saying your list doesn't have nice features or suggestions, but what would move more phones in a shorter time?
      William.Farrel
      • You make a valid point, William.

        Just going by personal observations, when my sister's household upgraded all their phones this past month, my brother-in-law remarked how much nicer his large screen Samsung Note 3 phone made his smartphone usage more enjoyable. My sister upgraded to the HTC One and her daughter got the bargain basement iPhone 4. (I think Verizon was giving those away for free.)

        So yes, I might agree with you on that point, Will. For my sister and her husband, the key upgrade feature was the larger display size over their previous phones.
        kenosha77a
        • One correction, though iPhone 6 will KEEP same size, it is the most ...

          ... popular form-factor in the world.

          Bigger iPhone will be separate model (http://d-rs.livejournal.com/983.html).
          DDERSSS
          • A rumor as a correction to another rumor?

            I still have my doubts that Apple will produce a phablet. But if they do, maybe I won't need to use bifocals. Although I'd probably need a purse to carry it.
            spstanley
        • I agree with kenosha

          It will take more than a screen size increase. I skipped the iPhone 5 and 5S, despite the minimal increase in screen size. A larger screen (within reason - 5" maximum) is only one of several things I'd need to see before I'd upgrade. I would also want more internal storage. The camera needs a significant upgrade, as well. The Nokia raised the expectations of what people want in their phone's camera. If I see all three on the iPhone 6, I'd finally upgrade.
          BillDem
        • Seeing the same

          Wife has my i5 (work phone - upgrades yearly) and her GS3. Almost all of her activities are done on the GS3 - bigger screen. She is currently looking at replacing her GS3 in a couple of months and one of her primary requirements: big clear good looking screen, but not too big.
          rhonin
      • My experience is the exact opposite

        My partner was laughing herself silly just a couple of days ago at the sight of a guy talking on a Galaxy Note (generation unknown) because "he looks like he's holding a dinner plate to the side of his head" and she would never dream of buying a phone that big. And she's not alone.

        I know quite a few people who have switched from Android to the iPhone over the last year or two exclusively because it was the only way they could by a top end phone that wasn't enormous. A few of them have certainly said they are planning on getting Z1 Compacts as soon as they are released here, as that has finally given them an Android option they can go back to.

        The point though is that not everyone wants a giant screened phone and it seems to me that being the high end phone with the small form factor has been one of Apples best differentiators and I can't see them abandoning it. At least not completely.

        I'm expecting a 4 inch iPhone 6, with a new processor more RAM and a new, more rounded body like that on the iPad Air/Mini, but given the persistence of this rumour maybe we will also see a 5+ inch iPhone 6C, where the C is for colossal.
        Daishi83
        • Daishi83

          I laughed myself silly when I read your comments regarding the iPhone anticipated screen size. You've lost touch with reality if you feel that 4 inches is large and 5 inches is colossal. Why don't you spend a few minutes reading the comments here and elsewhere regarding what nowadays is an appropriate screen size. My guess is that you're waiting for Apple to go back to a 3.5" screen, and you'll be first in line for it.
          stron90
          • Not at all.

            I never said I thought 4 inches was large, just that I expect the iPhone 6 to keep a screen that size. On reflection though what I really meant was that I expect Apple not to change the foot print of the phone greatly and some quick sums and comparisons with some of the more bezel-less phones on the market suggests that if Apple can shave the side bezels down to 2.5-3mm (the LG G2 is about 3.1mm so its not TOTALLY out of the question and would give them a 'smallest ever' to talk about) then they could squeeze a 4.3 inch screen into the existing device.

            Now, sure this is still small by modern standards and it would cause problems for the sacred cow of Apples "retina display" pixel density (though watch them try to spin it that because the screen is bigger you can hold the phone further from your face so the PPI doesn't have to be as high for the same result, or some guff), but I just can't see them abandoning the form factor of the existing phones because I think it would alienate a lot more existing users then they would pick up from other platform as a result.

            Of course its also possible that as you all say the market has spoken and they will do the 5+ inch iPhone 6 and what I am seeing will be the 6C equivalent. For 'Classic' maybe. I mean they kept the iPod Classic around for many years after the market had called time on them as well.
            Daishi83
          • Is that a SGSIV in your pocket . . .

            . . . or are you just glad to see me?

            I too hope they keep the original form factor and I don't want it thinner or rounder either. I presume the women put-up with the big phones because they can haul them in a purse; I like my front pocket in whatever pair of pants I have on. The few men I've seen with the big phones struggle to find a place on their body for them; I've seen quite a few lately clipping them to the front of their shirt after breaking several belt clips.
            Gr8Music
          • I have never had your troubles

            With a 5" phone in my pocket. Maybe your waist size has grown a bit and you need to get wider pants. The tight look isn't in any longer.
            marque2
          • You Got Me

            I reluctantly agree that my waist size has increased over the years but that has nothing to do with the invisibility of my iPhone in my pocket compared to the big phones.

            As far as the tight look, you may want to look at the youngsters out there . . . seems you're too old to know that the tight look came back a couple of years ago.
            Gr8Music
          • Purse?

            Go out and look.
            Not sure of your location (I'm in West Los Angeles) but here if they can fit it in their pocket, they do. SGS* and i5* are the most common and pockets are the preference. Clutches hands are next.....
            rhonin
          • Agree completely

            My youngest son was a diehard Apple fan with a succession of iPhones. Then he played around with a Galaxy Note 2 and was hooked on the larger screen size. Bottom like is that customers in his age range do far more texting and posting to Facebook, etc. than they do using the device as a traditional phone. I don't see this trend changing. This plus the negative reviews of iOS 6 will not lead to many iPhone converts from Android even if the new iPhone is sya 5 inches...
            simul8guy
          • Who cares about iOS6?

            That is so 2012
            Gr8Music
          • My wife laughed as well

            We saw a guy with a Galaxy Note WITH a case and he was holding it to his ear talking on the phone. It's ridiculous! Not saying its a bad phone but you must use your headphones if you're going to make a call. But 5" should be the new standard, today's iPhone screen is too small.
            new gawker
        • I agree - the iPhone 5/s is large enough for a PHONE

          I can do everything I need and can still see everything fine on the current size of the iPhone 5 or 5s. I don't mind the extra length versus the 4, but I have yet to find a larger phone I like. If Apple creates a larger phone, I hope they make two sizes. I, for one, will not purchase anything larger as a phone, because for me personally, it becomes too large to carry everywhere all the time.
          kratclif
          • what

            you can easily carry larger screen phones in your pockets. They aren't as big as you think they are. The s3 and 4's fit easily with room to spare. The Note's are getting up there though but even those will fit in a pocket. Your pocket is bigger than you think.
            piiman
          • Yep

            I have the Note 2 in my pocket every day... fits fine in my front pants pocket, even with an otter-style case on it (would fit even better in an inside jacket pocket or a purse); the only difference is that it doesn't leave room for anything else in that pocket (I could put some keys in there, but wouldn't want to)
            MatthewGudenius