Shares of Apple (NASDAQ:AAPL) have had a wonderful 2014, up a cool 21.3% year to date against a NASDAQ that's up just a fraction of that. Thanks to better-than-expected business results, and a firm commitment from the company's management team and board of directors to use the company's significant financial power to return capital to shareholders, Apple stock has shown itself -- once again -- to be a fantastic investment.

However, it seems that the best is yet to come as the company is set to launch its next generation set of iPhone devices (a 4.7-inch and a 5.5-inch model are rumored). These should usher in a reversal of two key headwinds that the company has faced, potentially driving its financials (and ultimately stock price) much higher during 2015.

The iPhone 6 should drive units and average selling prices up
In the most recent quarter, Apple reported shipments of 35.2 million iPhones -- up nearly 13% year over year. This is great news, particularly as Apple customers tend to be very "sticky" -- that is, once a customer goes iPhone, that customer is very likely to be an iPhone buyer in the future.

However, you'll notice one troubling trend -- iPhone revenues. Though the unit growth is in the low double digits, it seems that Apple is driving this growth at least partially by more aggressively attacking the lower end of the market. As a result, iPhone revenues were up only 8.6%, driven by an iPhone average selling price decline from $581 to $561 in the most recent quarter.

The good news is that the launch of the iPhone 6 -- which is very likely to come in a "standard" 4.7-inch variant and then an even more premium 5.5-inch variant -- could serve to drive average selling prices up. This mix shift up should be driven by a number of factors:

  • Higher tier available. With Apple allegedly introducing a 5.5-inch model that should sit above the 4.7-inch variant, any users that choose to pay a little bit more for the even larger screen could drive mix up.
  • Larger screens could drive richer storage size mix. Both the 4.7-inch and 5.5-inch models will be more conducive to watching movies and playing games on the go thanks to the larger screen real-estate. As a result, iPhone buyers may find themselves buying up the storage tier stack to make sure that they have enough space to store all of this content. This could help to further drive average selling prices up at very attractive margins. 
  • iPhone 5s moving down could drive mix up. While not confirmed, it is quite possible that Apple moves the iPhone 5s down the stack to the $99 with a two-year contract price point. The iPhone 5c would probably take the free with contract spot, but since the iPhone 5s has a more premium metal chassis and Touch ID, there could be enough value there for even budget-conscious consumers to buy the $99 model rather than the free one if possible.

The upshot here is that not only does Apple stand to gain share against the large-screen Android camp with the 4.7-inch and 5.5-inch smartphone models (driving volumes up), but that Apple is very likely to be able to sell a richer mix as well (driving revenues up and keeping margins intact). This bodes well for unit shipments and average selling prices -- addressing key concerns that have weighed on the Apple story. 

Foolish bottom line
If Apple is able to grow iPhone unit shipments and average selling prices throughout 2015, it's tough to see how Apple's top and bottom lines don't follow higher as well. If that turns out to be the case, and given that Apple still has a gigantic buyback program in place, it's hard to not be enthusiastic for what lies ahead for Apple's shares throughout 2015 -- and beyond.


 

Ashraf Eassa 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.