Gene Munster: Consumers Don't Want Smaller Apple iPhone

• Apple Inc. AAPL shares have gained 7 percent year-to-date, even after hitting a low of $103.12 on August 24.
• Piper Jaffray’s Gene Munster maintained an Overweight rating on the company, with a price target of $179.
• Only 20 percent of the users surveyed indicated a preference for a smaller screen, and they too could prefer a larger screen once they have upgraded to a 4.7" screen, Munster said.

Media reports indicate that Apple is working on a 4" iPhone 6C, aiming to launch this in early 2016. “Our supply checks this week indicate similar data,” analyst Gene Munster wrote.

While expressing skepticism about whether this product would actually be launched, Munster noted that Apple is unlikely to sell substantially more iPhone 6C devices than the typical low-end model, which is currently the 5S, and the company’s margins are unlikely to be significantly different.

The analyst added that out of the 1,077 US consumers surveyed, merely 20 percent had indicated a preference for the 4" smartphone screen size.

Noting the points in favor of the 6C, Munster said that Apple is at least considering a smaller device. “It would make sense to replace the aging 5S and would make the device lineup cleaner with the low priced option clearly different than the mid and high-end devices given a smaller screen.”

The availability of a low cost option, with a smaller screen, could trigger users considering low-end devices towards the mid-tier device, as there would be a significant benefit for the additional $100 with the larger screen.

On the other hand, consumers do not seem to want smaller devices. “We believe part of the reason that over 20% of smartphone users still say they prefer a 4" screen size is that they still have older model iPhones. When they upgrade to a 4.7" screen with an only slightly bigger footprint in the pocket, we expect those users would be converts to the larger screen size,” the Piper Jaffray report noted.