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Apple's Improved Upgrade Cycle Could Drive iPhone Sales

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Apple's Improved Upgrade Cycle Could Drive iPhone Sales

Apple's (NASDAQ: AAPL) quarterly earnings could get a boost now that the company has changed its upgrade policies.

"Our interest in Apple now is primarily driven by the upgrade cycle that, in the United States, may be improving given some changes that they've made in how they're selling phones in the market," BTIG analyst Walter Piecyk told Benzinga. "That should be a primary driver to help earnings growth."

According to Piecyk, Apple had previously implemented some policies that restricted upgrades. This inadvertently encouraged customers to hold off on buying a new iPhone for at least two years.

"They've kind of processed through those policies now," said Piecyk. "And now a lot of the sales of phones to customers is on phone leasing programs, which enables the customer to exit the two-year commitment that they've made in order to buy phones on a more frequent basis."

Related: Is Apple's Smart Home Concept Another False Rumor?

Going 'Home'

Apple will hold its annual Worldwide Developers Conference next week in San Francisco.

On its conference website, the Mac maker tells developers to "write the code" and "change the world." But if the rumors are true, it could be Apple that changes the world.

The Cupertino, California-based tech giant is rumored to be working on a smart home platform, which is thought to be the focus of next week's event.

"You could have some new product launches [in the pipeline]," said Piecyk. "There's certainly plenty of opportunities that exist, whether it's payments or smart homes or watches or all the stuff that we love to read about. As far as a smart home, I have no idea. I look forward to what they have to say next week."

If a new product, service or platform is announced, it would be a bit different from what investors expected to see just a couple of weeks ago: the official announcement of the long rumored acquisition of Beats Electronics.

Apple finally confirmed its plan to acquire Beats on Wednesday afternoon. With that announcement out of the way, it should be interesting to see what the company has to say at its event next week.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Latest Ratings for AAPL

DateFirmActionFromTo
May 2020WedbushMaintainsOutperform
May 2020DA DavidsonMaintainsBuy
May 2020Canaccord GenuityMaintainsBuy

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