Apple's iPhone install base features growing 'powder keg' ripe for upgrades, Cowen says
As Apple's iPhone install base continues to grow, so too do the number of customers who are likely to upgrade to a new handset, representing what one investment firm has dubbed a "powder keg" that could propel shares of AAPL higher.
Analyst Timothy Arcuri of Cowen and Company issued a note to investors this week, saying that continued focus on the "iPhone 7" and its expected lack of a major redesign is missing the real story. To him, Apple's installed base has a growing number of iPhone users who are due to buy a new handset in the coming years.
Cowen's analysis suggests that about a third of the iPhone installed base is currently running iPhone models that are greater than two years old. That's expected to grow to about 43 percent in the next four or five quarters, or growth of between 60 million and 70 million.
Cowen estimates that the current installed base is growing by about 70 million units per year, but less than 30 million of those are devices more than two years old. By the end of next year, Arcuri estimates that installed base growth will slow to 45 million units year over year, but the number of devices more than 2 years old will be growing by between 60 million and 70 million.
"In other words, the entire growth of the base -- and then some --?will be from older units that are ripe for upgrades, especially to a new OLED-enabled form factor," Arcuri wrote.
To Arcuri, the growing number of users due for upgrades signals one of two things. Either the "iPhone 7" cycle will prove better than investors fear, or Apple is setting up for a "super cycle" with a major redesign of the iPhone in 2017.
Arcuri noted that while the PC installed base has been aging for years, PCs are largely being replaced by other devices, including smartphones and tablets. He doesn't see the smartphone installed base remaining quite so stagnant, however, as there has yet to emerge a replacement form factor for the smartphone.
Seeing the potential for the "iPhone 7" to outperform expectations, or for a 2017 model to result in a "super cycle," Arcuri believes investors should buy in now.
"At this price, we think it very much pays to maybe still be a little early," he said.
Cowen and Company has maintained its "outperform" rating for shares of AAPL with a price target of $125.
Analyst Timothy Arcuri of Cowen and Company issued a note to investors this week, saying that continued focus on the "iPhone 7" and its expected lack of a major redesign is missing the real story. To him, Apple's installed base has a growing number of iPhone users who are due to buy a new handset in the coming years.
Cowen's analysis suggests that about a third of the iPhone installed base is currently running iPhone models that are greater than two years old. That's expected to grow to about 43 percent in the next four or five quarters, or growth of between 60 million and 70 million.
Cowen estimates that the current installed base is growing by about 70 million units per year, but less than 30 million of those are devices more than two years old. By the end of next year, Arcuri estimates that installed base growth will slow to 45 million units year over year, but the number of devices more than 2 years old will be growing by between 60 million and 70 million.
"In other words, the entire growth of the base -- and then some --?will be from older units that are ripe for upgrades, especially to a new OLED-enabled form factor," Arcuri wrote.
To Arcuri, the growing number of users due for upgrades signals one of two things. Either the "iPhone 7" cycle will prove better than investors fear, or Apple is setting up for a "super cycle" with a major redesign of the iPhone in 2017.
Arcuri noted that while the PC installed base has been aging for years, PCs are largely being replaced by other devices, including smartphones and tablets. He doesn't see the smartphone installed base remaining quite so stagnant, however, as there has yet to emerge a replacement form factor for the smartphone.
Seeing the potential for the "iPhone 7" to outperform expectations, or for a 2017 model to result in a "super cycle," Arcuri believes investors should buy in now.
"At this price, we think it very much pays to maybe still be a little early," he said.
Cowen and Company has maintained its "outperform" rating for shares of AAPL with a price target of $125.
Comments
It's a matter of expectations at the end. If the rumors about iPhone 7 are accurate (considering how the ones about the 6 indeed proved to be), it would seem Apple follows a 4-year radical redesign cycle next to its tick-tock "S" cycle. The original iPhone, then the 4 and the 6. The 3G(S) were incremental refinements of the original, and the 5 was little more than a stretched 4(S). I would have expected a radical redesign in 2016, at least for the sake of addressing the competition. But if the pattern holds, it looks like they'd pull a similar stunt with the 7 as they did with the 5, and perhaps sacrificing the S cycle in 2017 --unless they release a 7S next to the purported legendary 8. Although then it would become a bit too convoluted.
Anyway. At the end of the day it's usually just us tech forum geeks who really care, and the 7 will set sale records regardless whatever lack of "wow" factor.
When I see comments like yours I honestly wonder what would actually impress you.
By the way, a lot of the features you're mentioning have been already there since the 4(S).
IPhone is a product, not a life. If the product is good enough to buy/upgrade.. all the extra bells and whistles don't matter... unless they really do.... that's the point.
What is the compelling use case for those vast majority of older phone users to upgrade?
IMO - once the larger screen came out, not much. All those tech things quoted above are nice, neat, cool, but for the vast majority, perhaps sadly, irrelevant. They just want text, email, internet search, camera, phone... probably in that order.
Mmm ...
So, to summarize the analyst's opinion: some are some, and some are not!
Why do you idiots go on rants about rumors? Seriously. I hear a lot of "Apple is failing" based on random rumors regurgitated by tech bloggers.
Apple is facing a transition from a new product to a established product. Apart from the bigger screen in the iPhone 6, the improvements in the iPhone product line are becoming less relevant in the day to day usage. Four years ago if you a Android phone of $250, It was slow and the user experience was mediocre. If you buy now a Android smartphone of $250, the user experience is great. The iPhone may perform better in some aspects, but for a big part of the population the $250 device is quick enough, has a good screen and is as such perceived as excellent
With an established product line it is becoming more difficult for Apple to justify the high price, especially because an iPhone lack some feature that some people really appreciate: dual sim card, mini SD card, FM radio