Why Apple Inc. Will Benefit From a Larger iPhone

Apple can ride the wave of larger screen sizes, and give current iPhone customers a reason to upgrade.

Mar 18, 2014 at 11:30AM

Ok Apple (NASDAQ:AAPL), you've held out long enough. But now it's time to introduce a larger iPhone. Sure consumers would like to see something new, but there's also huge upsides for the company's sales and for investors.

The iPhone 5s' screen size measures 4 inches, but Apple may be about to change that. Source: Apple.

Big is the new normal
The move to bigger smartphones is no longer just a passing trend, though the term "phablet" hopefully is. According to IHS, shipments of phones larger than 4.5 inches were expected to hit 431 million by the end of 2013, up from 99 million in 2012.

As reported by Barrons, Brian Marshall from ISI Group recently released an investor note saying there could be a "massive" upgrade cycle for current iPhone users when Apple releases two new rumored iPhone sizes, a 4.7-inch and a 5.5-inch. But he's not the only one projecting a larger iPhone. The Wall Street Journal has said that two bigger iPhones, with screens larger than 4.5 inches and bigger than 5 inches, will be released in the second half of the year.

Marshall thinks there's pent up demand from current iPhone owners for a larger phone, and Apple could reach peak upgrade rates of 12-14% during the second half of 2014. That could bring $3.00 earnings per share, or 10-15%, over the second half of the year, according to Marshall.

Same quality, new form factor
iPhone users are already a famously loyal bunch, but bigger screens would add something relatively new for consumers to get excited about. The smartphone market in the U.S. is reaching a saturation point, and the difference between high-end devices is difficult to decipher.

For many users, one of the deciding factors is simply screen size. For current iPhone loyalists, the larger screen would keep the high-end internals, stellar operating system, and ecosystem that consumers love, but add more real estate to the screen size as well.

Going big
Apple just changed its iPhone lineup last year when it introduced the new iPhone 5c. So introducing two new form factors this year seems like a big move from a company that typically makes small changes to its devices over several update cycles. But Apple is being outpaced by the competition when it comes to smartphone growth. In 2013, the smartphone market grew by 38%, while Apple's growth was just 13%.

Adding two bigger screen sizes would certainly drum up increased interest among current iPhone users and could even lure some Android users away. Either way it's a win for the company. Apple can tap into the larger screen size trend, keep current users happy, and hopefully increase its growth in a saturated market. 

Who the real winner of the smartphone war is
Want to get in on the smartphone phenomenon? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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