A woman using a smartphone walks past an Apple store in Shanghai, China, May 9, 2019.
Qilai Shen | Bloomberg | Getty Images
Apple has “significantly potential iPhone upgrade” in China ahead of the launch of its next flagship smartphone, Morgan Stanley said in a note on Wednesday.
The return on investment analysts said that just over 68% of the iPhone installation base in China consists of devices that are at least 2 years old. That’s nearly 8 percentage points up from last year, and more than 20 percentage points from 2017, according to data collected by Morgan Stanley.
“In our view, this speaks to the significant potential for iPhone upgrade in China, the largest in at least 4 years, and helps support our Bullish call that could mean the growth of iPhone shipping in FY21 (fiscal year 2021), said Morgan Stanley in a note.
That upgrade cycle is driven by a number of factors. In fact, it is expected that the next iPhone from Apple will be able to connect to 5G networks.
Second, “improving affordability”, thanks to the launch of the cheaper second-generation iPhone SE and “expectations for stable prices” for the next device, could also drive upgrades.
Third, “increased adoption of trading and financing programs” could help Apple, Morgan Stanley said.
Bullish sentiment helped Apple become the first publicly traded U.S. company to reach a $ 2 trillion market capitalization on Wednesday. Apple shares are up 57% this year.
‘Once in a decade chance’
Other Wall Street analysts are Bullish about the upgrade cycle for Apple’s next iPhone.
“5G will drive a three-year device upgrade cycle along with 5G-related benefits of opening new cases for mobile use,” Gene Munster of Loup Ventures said in a note on Wednesday. He said this was one key theme for Apple’s market cap to continue to rise above $ 2 trillion.
Daniel Ives of Wedbush Securities called the next iPhone a “once in a decade opportunity over the next 12 to 18 months.”
“We estimate roughly 350 million of Cupertino’s 950 million iPhones worldwide in the window of an upgrade opportunity,” Ives said in a note released earlier this month.
“China remains an important ingredient in Apple’s recipe for success, as we estimate roughly 20% of iPhone upgrades will come from this region over the next year. At this point, we’ve seen a lot in recent months. strength of the China region, a dynamic we expect to continue for the next 6 to 9 months. “
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