Pacific Crest sees larger $299 iPhone increasing profits, ups Apple price target to $635

Posted:
in AAPL Investors edited March 2014
Shares of Apple rose Tuesday morning after Pacific Crest upgraded its rating on the stock to "outperform," citing high expectations for the company's next iPhone, which the firm expects to sport a 4.7-inch display and $299 starting price tag.

iPhone Plus
Mockup of iPhone with 4.94-inch screen, created by Marco Arment.


Analyst Andy Hargreaves issued a note to investors on Tuesday, setting a new price target of $635, or about $100 more than its current trading price. He sees a larger iPhone priced starting at $299 increasing gross profit on replacement sales, and also attracting new customers that would otherwise have opted for an Android handset with a bigger display.

Estimates from Hargreaves suggest that Apple could gain as much as $4 in earnings per share in 2014 if 35 percent of iPhone customers were to opt for the larger display. His projections suggest Apple could capture 10 percent of the existing jumbo-sized phone market, with devices larger than 4 inches currently dominated by Google's Android platform.

Hargreaves is especially encouraged by the fact that Apple's new mid-range iPhone 5c has not had an adverse effect on sales of the high-end iPhone 5s. He takes this as a sign that consumers are willing to pay more for premium products in the smartphone space, and as a result he believes a $299 starting price for a larger iPhone wouldn't deter most buyers.

Currently, Apple's iPhone 5s and iPhone 5c come with screen sizes of 4 inches. Some rumors have claimed that Apple's next-generation handset, sometimes referred to as an "iPhone 6," will sport an even larger display, marking the second time that Apple has increased the size of the iPhone screen.

While some reports have claimed Apple has experimented with iPhone screen sizes approaching 6 inches diagonally, proven insider Ming-Chi Kuo of KGI Securities believes Apple won't exceed 5 inches on a larger iPhone display, citing the company's commitment to an "unwavering principle of one hand use." He expects the next iPhone to have a screen size larger than 4.5 inches, but smaller than 5.
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Comments

  • Reply 1 of 66

    So I assume this $299 starting price point is actually on-contract and in reality $100 more than the iPhone 5S? Otherwise, this makes no sense.

  • Reply 2 of 66

    I presume $299 is the subsidized price?

  • Reply 3 of 66
    jusephejusephe Posts: 108member
    So analysts wants cheaper or more expansive iPhones ?
    This just show that they don't have the smallest cue of what is good for such company.
  • Reply 4 of 66
    Quote:

    Originally Posted by jusephe View Post



    So analysts wants cheaper or more expansive iPhones ?

    This just show that they don't have the smallest cue of what is good for such company.

    You have hit a "nail on the head" moment. Last year Apple was hammered for not releasing a cheap iPhone, which would have made it join the race to the bottom like the Android camp. Now analysts who want to pump up Apple's stock price are going to put a positive spin on Apple releasing a more expensive iPhone.

  • Reply 5 of 66
    gwmacgwmac Posts: 1,807member

    I am so sick of seeing that same mock up for every single news story about a new iPhone. Please for the love of God change it up from time to time with new mock ups. 

  • Reply 6 of 66
    Just think of how low AAPL might get if a larger iPhone is not introduced this year.
  • Reply 7 of 66
    rogifanrogifan Posts: 10,669member
    Sorry, but the is bull. Apple didn't increase the price of the iPhone when it went 4", they won't do it if it goes 4.5" - 4.7". I could maybe see Apple releasing a 128GB model, though I think they should increase storage and make it 32/64/128 standard.
  • Reply 8 of 66
    tallest skiltallest skil Posts: 43,388member
    Originally Posted by Drunkzombie View Post

    Just think of how low AAPL might get if a larger iPhone is not introduced this year.

     

    Good. Then Apple can buy up all the stock and keep these imbeciles away from their money. 

  • Reply 9 of 66
    darklitedarklite Posts: 229member
    Quote:

    Originally Posted by leavingthebigG View Post

     

    You have hit a "nail on the head" moment. Last year Apple was hammered for not releasing a cheap iPhone, which would have made it join the race to the bottom like the Android camp. Now analysts who want to pump up Apple's stock price are going to put a positive spin on Apple releasing a more expensive iPhone.


    There's different arguments in favour of both. As the article says, a larger iPhone will attract users that might otherwise get an Android phone (I'm actually in this category), but smaller / cheaper iPhones would attract a lot of users and get them entrenched in Apple's ecosystem (as well as seriously damaging Samsung and reducing their ability to compete in Apple's core markets).

  • Reply 10 of 66
    SpamSandwichSpamSandwich Posts: 33,407member
    What proof is there that there is a larger segment of the buying public that is willing to pay for an oversized iPhone versus the currently best-selling size of iPhone? Surely any additional sales would be incremental. Analysts are unworthy of the attention paid to them by AI. Who is in bed with whom on these "reports"?
  • Reply 11 of 66
    gwmacgwmac Posts: 1,807member
    Quote:

    Originally Posted by Tallest Skil View Post

     

     

    Good. Then Apple can buy up all the stock and keep these imbeciles away from their money. 


    Says someone who very likely owns no Apple stock or has the foggiest idea about finance. Many people's retirements and investments are heavily weighted with AAPL. Millions of middle class Americans would suffer and those manipulators will always make money regardless what the price does, so the only people that would suffer would be common shareholders and Apple. 

  • Reply 12 of 66
    jungmarkjungmark Posts: 6,926member
    jusephe wrote: »
    So analysts wants cheaper or more expansive iPhones ?
    This just show that they don't have the smallest cue of what is good for such company.

    Yes, and new products, maintain margins, and "innovations".
  • Reply 13 of 66
    asdasdasdasd Posts: 5,686member
    Presumably if they increase prices at the high end they will reduce em at the lower end. Maintain rather than increase margins.

    He's probably right about top end iPhone buyers, or potential buyers of subsidised phones being not very price conscious. The middle unsubsidised smart phone market is pretty price conscious though.

    So, continue the 5C selling lower than the 4S now by $100, have a plastic 6C ( or just keep the 5S) selling at the price of the 5C now; and up the price for the 6 by $100.

    Margins will stay the same or grow depending on the ratio of sales ( and the no doubt reduced price of the materials for the 5C this year) and sales grow.
  • Reply 14 of 66
    jungmarkjungmark Posts: 6,926member
    rogifan wrote: »
    Sorry, but the is bull. Apple didn't increase the price of the iPhone when it went 4", they won't do it if it goes 4.5" - 4.7". I could maybe see Apple releasing a 128GB model, though I think they should increase storage and make it 32/64/128 standard.

    I think Apple will increase the price for a 5" but only if they release a new 4". Let's call it the iPhone 6 and 6+.
  • Reply 15 of 66
    bloggerblogbloggerblog Posts: 2,480member
    Quote:

    Originally Posted by SpamSandwich View Post



    What proof is there that there is a larger segment of the buying public that is willing to pay for an oversized iPhone versus the currently best-selling size of iPhone?...

    I personally know several friends who have already switched to the GS4 purely due to the larger screen. Even with Android's shortcoming and noticeable lag, the larger keyboard and larger browser considerably enhances the experience. I'm looking forward to a larger/wider iPhone.

  • Reply 16 of 66
    froodfrood Posts: 771member
    Quote:

    Originally Posted by gwmac View Post

     

    I am so sick of seeing that same mock up for every single news story about a new iPhone. Please for the love of God change it up from time to time with new mock ups. 


     

    This.  Especially since that mock up is unfavorable to the iPhone.  Its screen size is about the same size as the Samsung phone to the left (S3/S4?), but the physical dimensions are much larger.  If they are going to keep the fingerprint sensor as is they need to remove the top bezel almost entirely and keep at just the height of the speaker.

     

    And if the prior article is anything resembling reality, don't have the camera bump out.  Instead make the whole phone a little thicker and include a larger battery.

  • Reply 17 of 66
    gwmacgwmac Posts: 1,807member
    Quote:
    Originally Posted by Frood View Post

     

     

    This.  Especially since that mock up is unfavorable to the iPhone.  Its screen size is about the same size as the Samsung phone to the left (S3/S4?), but the physical dimensions are much larger.  If they are going to keep the fingerprint sensor as is they need to remove the top bezel almost entirely and keep at just the height of the speaker.

     

    And if the prior article is anything resembling reality, don't have the camera bump out.  Instead make the whole phone a little thicker and include a larger battery.


    Yeah the mock up iPhone looks ginormous next to the Samsung on the left with the same sized display. A bigger iPhone would definitely need to shave off something from the forehead and possibly even the chin though the home button is the problem there. Unless they go oval no easy way to reduce chin bezel area much.

  • Reply 18 of 66
    darklitedarklite Posts: 229member
    I don't think anyone's arguing that there should be a 'one size fits all' approach to iPhones. The larger iPhone is generally envisioned as an 'iPhone Pro'-style model while the cheaper one is more of an 'iPhone Mini' - they're not intended to replace the core iPhone line, merely as alternatives to the stock model. Same reason there's multiple sizes of iPad and Macbook - different people have different requirements (hell, I've even seen people on this forum express a preference for the old 3.5" iPhone), and if Apple can't meet their needs they're going to look elsewhere.
  • Reply 19 of 66
    slurpyslurpy Posts: 5,385member

    ..Because Apple desperately needs to increase it's profits. Might go in the red any day now. 

  • Reply 20 of 66
    Quote:

    Originally Posted by gwmac View Post

     
    ..... Americans would suffer and those manipulators will always make money regardless what the price does...


    This is the dumbest canard -- always fact-free -- that is thrown around regularly in these forums. If you know this to be the case, give us evidence. And no, anecdotes ('Madoff') don't count.

     

    Incidentally, the millions of Americans who have their retirement money in Apple have it through institutional investors, apparently the very same that you think are 'manipulators.' 

     

    You can't have it both ways.

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