How the iPhone 6 Could Be a Game-Changer for Apple, Inc. Stock

Is the market missing the potential in Apple's iPhone 6?

Jul 5, 2014 at 2:20PM

By this point, it's widely known that Apple's (NASDAQ:AAPL) next line of iPhones is likely to sport models with larger displays. The iPhone 6 will allegedly come in two sizes: a 4.7-inch display and a 5.5-inch display. But how will the phone fare in the marketplace?

A record-breaking iPhone 6
As the annual fall iPhone launch approaches, analysts are raising their price targets. The consensus analyst price target for Apple stock is $101.49, just over the stock's all-time high. Central to the increased confidence in Apple's iPhone lineup seems to be the iPhone 6 line.


4.7-inch and 5.5-inch iPhone 6 mockups pictured with the 4-inch iPhone 5s. Image source: 9to5Mac, used with permission.

Consider Evercore analyst Rob Cihra (via AppleInsider), for instance. His target for Apple stock is $115. Part of his reason for such optimism in the stock is his big hopes for Apple's iPhone 6 lineup. He is predicting 58 million units in Apple's first fiscal quarter (the important holiday quarter) of 2015 alone. That's 14% higher than the iPhone units sold in the comparable quarter in 2014. Pent-up demand for an iPhone with a larger display, he says, will serve as a growth driver for the segment.

Apple, too, is apparently betting on a big win for the iPhone 6. Longtime Morgan Stanley Apple analyst Katy Huberty says that suppliers in the Far East are preparing for iPhone 6 sales that are 20% higher than iPhone 5s sales. Considering that the iPhone 5c is thought to only account for a minority of Apple's iPhone sales, this would be meaningful growth for the company.

Is this growth priced in?
Probably not. With Apple's iPhone business accounting for 57% of iPhone sales and an even larger portion of profits, the health has a large influence on Apple's bottom line. Fourteen percent growth in Apple's year-over-year iPhone units, as Cihra has predicted, is likely to help boost Apple's EPS (not considering the impact of share repurchases) by at least 10% incrementally.


Another rendering of the alleged iPhone 6. Image source: Martin Hajek, used with permission. 

Then once you add in the impacts of share repurchases and the potentially wholly accretive sales sourced from Apple's rumored iWatch, it's possible that Apple could grow EPS by as much as 20% in the first fiscal quarter of 2015.

This sort of growth would mark a major uptick to the year-over-year EPS growth of 10.7% Apple reported in the first quarter of 2014. 

If Apple does rekindle growth to these levels, the stock could turn out to be a steal at $94. For instance, if Apple could average 20% growth in EPS for the entire calendar year of 2015, that would put Apple's current price-to-forward estimates of earnings ratio somewhere around a very conservative 12.3. Compare that to the S&P 500's price-to-forward earnings ratio of 16.6. 

While none of this growth is certain, the potential for upside makes Apple stock look enticing. After all, even if Apple fails to boost product sales enough for its products to contribute to EPS growth, its aggressive share repurchase program alone will provide value to shareholders. And given Apple's healthy cash flow, the company will likely authorize more cash for repurchases when this plan expires at the end of fiscal 2015.

The iPhone 6 could be the product that helps Apple prove to the Street how much it has underestimated the company.

The stock that may win big thanks to Apple's alleged iWatch
With the iWatch, Apple may spark a revolution. ABI Research predicts 485 million iWatch-like devices will be sold per year by 2018. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, just click here!

Daniel Sparks owns shares of Apple. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers