Apple's iPhone install base features growing 'powder keg' ripe for upgrades, Cowen says

Posted:
in AAPL Investors
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.


Edge-to-edge iPhone display concept by Martin Hajek.


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.
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Comments

  • Reply 1 of 41
    6Sgoldfish6Sgoldfish Posts: 108member
    The growing number of users due for upgrades signals a couple more things. A certain number them may be satisfied enough as to not care about upgrading to the latest and greatest. There are those who cannot afford to. And then there are those, myself included, who find themselves unimpressed by Apple's recent offerings and prefer to wait it out. And it's a long wait until 2017..
    edited June 2016 cropr
  • Reply 2 of 41
    mj webmj web Posts: 918member
    If "Apple is setting up for a "super cycle" with a major redesign of the iPhone in 2017", as the article suggests, that's just an apologetic excuse for Apple blowing critical deadlines for its iPhone 7 ramp in 2016. Contrary to the analyst's conclusion, I won't upgrade my iPhone 6, as always, unless the iPhone 7 strikes me as a must have investment.
    edited June 2016 6Sgoldfish1983entropys
  • Reply 3 of 41
    foggyhillfoggyhill Posts: 4,751member
    The growing number of users due for upgrades signals a couple more things. A certain number them may be satisfied enough as to not care about upgrading to the latest and greatest. There are those who cannot afford to. And then there are those, myself included, who find themselves unimpressed by Apple's recent offerings and prefer to wait it out. And it's a long wait until 2017..
    Unimpressed in what way? This is basically a standard issue response.
    nolamacguybaconstanglolliver
  • Reply 4 of 41
    6Sgoldfish6Sgoldfish Posts: 108member
    foggyhill said:
    Unimpressed in what way? This is basically a standard issue response.
    In the industrial/product design way.

    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. 
    edited June 2016
  • Reply 5 of 41
    19831983 Posts: 1,101member
    The growing number of users due for upgrades signals a couple more things. A certain number them may be satisfied enough as to not care about upgrading to the latest and greatest. There are those who cannot afford to. And then there are those, myself included, who find themselves unimpressed by Apple's recent offerings and prefer to wait it out. And it's a long wait until 2017..
    Yes, I'm in the same camp as you. What might be worrying though is that a number of those older users also unimpressed by Apple's offerings, instead of waiting it out will jump ship and go to Android instead.
    6Sgoldfish
  • Reply 6 of 41
    volcanvolcan Posts: 1,710member
    who find themselves unimpressed by Apple's recent offerings ...
    So by recent offerings you mean the iPhone 6s+? You know the one with optical camera stabilization, shoots 4K video, has TouchID, 3D Touch, Continuity, AirPlay, FileDrop, FaceTime, always on Siri, LTE Advanced, Wi-Fi Assist, integration with Apple Watch, 12 MP Live photos, TrueTone Flash, ambient light sensor, Taptic Engine not to mention the fastest 64 bit processor, and GPU that are literally 70% and 90% faster than the previous model, also the Metal coprocessor for better battery life and gaming, and probably more that I can't think of right now including the best developer environment of any other platform.

    When I see comments like yours I honestly wonder what would actually impress you.
    edited June 2016 TurboPGTjfc1138calibrucemcmetrixbadmonkfoadnolamacguyjax44baconstang
  • Reply 7 of 41
    TurboPGTTurboPGT Posts: 355member
    volcan said:
    who find themselves unimpressed by Apple's recent offerings ...
    So by recent offerings you mean the iPhone 6s? You know the one with optical camera stabilization, shoots 4K video, has TouchID, 3D Touch, Continuity, AirPlay, FileDrop, FaceTime, always on Siri, LTE Advanced, Wi-Fi Assist, integration with Apple Watch, 12 MP Live photos, Taptic Engine not to mention the fasted 64 bit processor, and GPU that are literally 70% and 90% faster than the previous model, also the Metal coprocessor for better battery life and gaming, and probably more that I can't think of right now including the best developer environment of any other platform.

    When I see comments like yours I honestly wonder what would actually impress you.
    Nothing, like so many trollbots they just regurgitate the opinion they are told to have by the various tech blogs which are their source for opinion and knowledge.
    jfc1138calibrucemcbadmonknolamacguybaconstanglolliveriphonenick
  • Reply 8 of 41
    igorskyigorsky Posts: 414member
    volcan said:
    who find themselves unimpressed by Apple's recent offerings ...
    So by recent offerings you mean the iPhone 6s? You know the one with optical camera stabilization, shoots 4K video, has TouchID, 3D Touch, Continuity, AirPlay, FileDrop, FaceTime, always on Siri, LTE Advanced, Wi-Fi Assist, integration with Apple Watch, 12 MP Live photos, Taptic Engine not to mention the fasted 64 bit processor, and GPU that are literally 70% and 90% faster than the previous model, also the Metal coprocessor for better battery life and gaming, and probably more that I can't think of right now including the best developer environment of any other platform.

    When I see comments like yours I honestly wonder what would actually impress you.
    I wonder if these same people set the same untenable standards for themselves in their own lives that they set for Apple.
    jfc1138calibrucemcai46badmonkfoadneil andersonstourquenolamacguybaconstang
  • Reply 9 of 41
    mtbnutmtbnut Posts: 189member
    With the yawn-inducing features (and design) rumored to be going into the iPhone 7, looks like my 5S will keep doing its work for me for another year. 
    edited June 2016 6Sgoldfish
  • Reply 10 of 41
    6Sgoldfish6Sgoldfish Posts: 108member
    volcan said:
    who find themselves unimpressed by Apple's recent offerings ...
    So by recent offerings you mean the iPhone 6s+? You know the one with optical camera stabilization, shoots 4K video, has TouchID, 3D Touch, Continuity, AirPlay, FileDrop, FaceTime, always on Siri, LTE Advanced, Wi-Fi Assist, integration with Apple Watch, 12 MP Live photos, Taptic Engine not to mention the fasted 64 bit processor, and GPU that are literally 70% and 90% faster than the previous model, also the Metal coprocessor for better battery life and gaming, and probably more that I can't think of right now including the best developer environment of any other platform.

    When I see comments like yours I honestly wonder what would actually impress you.
    I said it. Improved/renewed industrial/product design would impress me.  Apple had eg. filed a patent a couple of years ago for encasing the electronics of iDevices within slabs of glass, and has recently filed a patent for 3D printing Liquidmetal components. They hired Marc Newson to join forces with Ive. They can afford to do literally anything they put their minds on. So, I'd like to see them put down to actual use. 

    Now, to address your question, I had both the 6S+ and the SE in mind. Same shells, different innards. OK, users like you may fap away with updated hardware specs in a phone. I personally don't care much about the processor, if it’s 7000 series Aluminium, if Siri is always-on, or it's integrated with a watch I don't plan to buy. Frankly, I wish Apple would put similar (hardware) dedication to their annual Mac updates, the entire product family of which is painfully long in the tooth. When it comes to the phone though, a user doesn't need a faster horse, they want a nicer looking car with a good battery. 

    By the way, a lot of the features you're mentioning have been already there since the 4(S). 
    edited June 2016
  • Reply 11 of 41
    boeyc15boeyc15 Posts: 986member
    igorsky said:
    volcan said:
    So by recent offerings you mean the iPhone 6s? You know the one with optical camera stabilization, shoots 4K video, has TouchID, 3D Touch, Continuity, AirPlay, FileDrop, FaceTime, always on Siri, LTE Advanced, Wi-Fi Assist, integration with Apple Watch, 12 MP Live photos, Taptic Engine not to mention the fasted 64 bit processor, and GPU that are literally 70% and 90% faster than the previous model, also the Metal coprocessor for better battery life and gaming, and probably more that I can't think of right now including the best developer environment of any other platform.

    When I see comments like yours I honestly wonder what would actually impress you.
    I wonder if these same people set the same untenable standards for themselves in their own lives that they set for Apple.

    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.

    6Sgoldfish
  • Reply 12 of 41
    dick applebaumdick applebaum Posts: 12,471member

    Mmm ...

    So, to summarize the analyst's opinion:  some are some, and some are not!

  • Reply 13 of 41
    calicali Posts: 3,495member
    mtbnut said:
    With the yawn-inducing features (and design) rumored to be going into the iPhone 7, looks like my 5S will keep doing its work for me for another year. 
    RUMORS dude. RUMORS. You even acknowledge they're rumors and STILL hold them as truth("my 5s will keep doing its work for me").

    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.
    nolamacguybaconstanglolliver
  • Reply 14 of 41
    6Sgoldfish6Sgoldfish Posts: 108member
    cali said:
    mtbnut said:
    With the yawn-inducing features (and design) rumored to be going into the iPhone 7, looks like my 5S will keep doing its work for me for another year. 
    RUMORS dude. RUMORS. You even acknowledge they're rumors and STILL hold them as truth("my 5s will keep doing its work for me").

    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.
    Maybe because the rumors about the iPhone 6 all turned out to be true. And then some. 
  • Reply 15 of 41
    volcanvolcan Posts: 1,710member
    foggyhill said:
    Unimpressed in what way? This is basically a standard issue response.
    In the industrial/product design way.

    It's a matter of expectations at the end. If the rumors about iPhone 7 
    So by recent offerings you mean the yet unannounced iPhone. And by unimpressed you mean the case could be the same? For me the case is fine as it is, it is the functionality on the inside that is the more important in my opinion.
    nolamacguybaconstanglolliver
  • Reply 16 of 41
    6Sgoldfish6Sgoldfish Posts: 108member
    volcan said:
    In the industrial/product design way.

    It's a matter of expectations at the end. If the rumors about iPhone 7 
    So by recent offerings you mean the yet unannounced iPhone. And by unimpressed you mean the case could be the same? For me the case is fine as it is, it is the functionality on the inside that is the more important in my opinion.
    Read my answers again and you'll see what I mean.
    edited June 2016
  • Reply 17 of 41
    jonljonl Posts: 210member
    "Powder-keg" and "super-cycle" concerning replacement potential is a prayer for a sharp share price rise so their clients can sell to suckers who fall for their hype.
  • Reply 18 of 41
    6Sgoldfish6Sgoldfish Posts: 108member
    TurboPGT said:
    When I see comments like yours I honestly wonder what would actually impress you.
    Nothing, like so many trollbots they just regurgitate the opinion they are told to have by the various tech blogs which are their source for opinion and knowledge.
    I wonder what is your source. God? Steve Jobs from the beyond? 
    edited June 2016
  • Reply 19 of 41
    SpamSandwichSpamSandwich Posts: 29,874member
    1983 said:
    The growing number of users due for upgrades signals a couple more things. A certain number them may be satisfied enough as to not care about upgrading to the latest and greatest. There are those who cannot afford to. And then there are those, myself included, who find themselves unimpressed by Apple's recent offerings and prefer to wait it out. And it's a long wait until 2017..
    Yes, I'm in the same camp as you. What might be worrying though is that a number of those older users also unimpressed by Apple's offerings, instead of waiting it out will jump ship and go to Android instead.
    LMAO! 
    baconstanglolliver
  • Reply 20 of 41
    croprcropr Posts: 833member
    volcan said:

    So by recent offerings you mean the iPhone 6s+? You know the one with optical camera stabilization, shoots 4K video, has TouchID, 3D Touch, Continuity, AirPlay, FileDrop, FaceTime, always on Siri, LTE Advanced, Wi-Fi Assist, integration with Apple Watch, 12 MP Live photos, TrueTone Flash, ambient light sensor, Taptic Engine not to mention the fasted 64 bit processor, and GPU that are literally 70% and 90% faster than the previous model, also the Metal coprocessor for better battery life and gaming, and probably more that I can't think of right now including the best developer environment of any other platform.
    That is exactly the issue.  Most items on your impressive feature list only give me a "so what" reaction.  Do I care about Siri, it if sucks in my mothertongue (Dutch), do I care about Facetime if 80% of my peers are on Android, do I care about my iPhone 6S+ being faster than my iPhone 5, if the latter is fast enough in 99% of the cases, ... 

    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
    6Sgoldfish
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