Another Good Sign for Apple's iPhone 6 Launch

Strong demand for the iPhone 5s bodes well for Apple's iPhone 6 sales in the upcoming year.

Jul 27, 2014 at 6:30PM

Apple (NASDAQ:AAPL) investors are eagerly awaiting the upcoming fall product cycle. While Apple CEO Tim Cook has been hinting for a year that the company is on the verge of entering new product categories, the launch of the next-generation iPhone, probably to be called the iPhone 6, will still probably hold the spotlight.

Investors are particularly excited about the launch of the iPhone 6, because it's expected to feature a larger screen size than previous iPhone models -- a feature that many consumers have asked for.


The iPhone 5s will soon surpass the iPhone 5 as the most popular iPhone. (Photo: The Motley Fool.)

One encouraging sign is the strong demand Apple is seeing for the smaller iPhones it's currently selling. The iPhone 5s is on the verge of surpassing the iPhone 5 as the most popular iPhone model, as measured by usage share. Considering how well the iPhone business is doing with Apple's present limited product family, the addition of a larger iPhone 6 should drive impressive sales and earnings growth.

iPhone 5s usage share grows
Mixpanel publicly tracks iPhone usage trends by model. According to Mixpanel's data, strong early sales of the iPhone 5s following its September 2013 debut helped it grow to represent about 15% of all iPhone usage by the beginning of 2014.

Usage growth has trailed off over the course of the year, but the iPhone 5s has now reached a usage share of approximately 28%. That puts it on par with the iPhone 5, the previous top-of-the-line model. Including the iPhone 5c, which was also introduced last fall, the new iPhones now represent more than 38% of total iPhone usage.

Obviously, it's not necessary to rely on usage data to know that iPhone sales are growing. In the past year, Apple has reported consistent iPhone unit sales growth ranging from the high single digits to the low double digits. Tim Cook also recently told investors that Apple is seeing growth across all three iPhone price points.

However, the high usage share for the iPhone 5s shows that there is strong demand for Apple's most advanced products. If that's true, then with even bigger improvements expected for the iPhone 6, Apple could see explosive growth for some of its highest-margin products.

Two key things to watch
The expected introduction of new iPhone form factors should give a big boost to Apple's sales and earnings in the coming year, for two reasons. First, the arrival of highly differentiated iPhones should drive strong upgrade demand. Whereas previous iPhones have had 3.5- and 4.0-inch screen sizes, most observers expect Apple to launch a 4.7-inch iPhone 6 along with a 5.5-inch "phablet"-type device.


Most recent iPhone sales have gone to first-time iPhone users. (Photo: The Motley Fool.)

In fact, Apple seems to have achieved solid iPhone sales growth this year despite relatively modest upgrade demand. In April, Cook noted that over half of the people registering iPhones in the previous six months were new to the iPhone.

If anything, this trend intensified last quarter. In Q3, Apple saw its weakest results in developed markets, where the bulk of demand is for replacements rather than new users. The iPhone 6 launch should persuade a much higher percentage of Apple's installed base to upgrade in the next year.

The second reason the iPhone 6 could be a game-changer for Apple is that it could really turbocharge the company's growth in China. Apple's position at the forefront of the shift to LTE in China is already paying off. iPhone sales grew 48% in China last quarter, double the rate of the market as a whole.

That's quite impressive, considering big-screen phones have become extremely popular in China and Apple isn't in that part of the market yet. Just as the launch of a larger iPhone 6 should catalyze upgrade demand in the U.S. and other developed markets, it will also give Apple a big leg up in the large, rapidly growing Chinese market.

Foolish wrap
One of the best signs for the iPhone 6's sales prospects is the strong demand Apple has seen for the iPhone 5s. After 10 months on the market, the iPhone 5s is on the verge of surpassing the iPhone 5 as the most popular iPhone model. The iPhone 5c has also carved out a nice niche for itself with a 10% usage share.

Apple bears complain that the company has fallen behind competitors in the smartphone market. If that's true, imagine how many more iPhones Apple might sell when it "catches up" by offering big-screen versions later this year. Higher upgrade demand and strong growth in China should provide a big boost to earnings as the next year unfolds.

Risk-free for 30 days: The Motley Fool's flagship service
Tom and David Gardner founded The Motley Fool over 20 years ago with the goal of helping the world invest ... better. Their flagship service, Stock Advisor, has helped thousands of investors take control of their financial lives and beat the market. Click here to sign up today.

Adam Levine-Weinberg is long January 2016 $80 calls on 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

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.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

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. It's also featured on several dozen 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 ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers