"The 'mother lode' of all Apple upgrade cycles" said to bring two new iPhones this year46
"'Large-screen envy' is prevalent among the iPhone installed base and we believe a ~5" form-factor iPhone would spark a massive upgrade cycle as well as many 'Android switchers' returning back to the iPhone," ISI explained their reasons for the upgrade.
"We estimate the current iPhone installed base to be about 260mil users (roughly equivalent to the last 7 quarters worth of iPhone units). By our calculations, we estimate slightly over half of iPhone sales today go to upgrades (with the majority of new users coming from international markets). However, we believe that while the upgrade rate (i.e., % of installed base upgrading their device in a given quarter) had hovered in the 10-11% range over 2011-12, it has now dropped closer to 9% as users find few compelling reasons to upgrade. In peak quarters, the upgrade rate has reached the ~12-14% range and we expect a similar upgrade rate in 2H14 for iPhone 6, if not better. We believe this could drive ~$3.00 (or ~10-15%) EPS accretion over 2H14 assuming an incremental ~3% of the base upgrades each quarter," ISI said.
In a nutshell, ISI suggests that having new iPhones with a larger display could be a huge incentive for customers to upgrade their old iPhones, plus ISI believes that such rumored larger-screen iPhones would also eat away from the Android market.
ISI is also not the only analyst to upgrade its outlook on Apple stock recently. Pacific Crest upgraded Apple from “sector perform” to “outperform”, and others reiterated a “buy” rating on the stock. Let’s not forget that in the last few years, Apple unveiled its iPhone at the beginning of the third quarter, and - if it follows the same timelines this year - we’re still nearly half a year off from that expected announcement.
source: Business Insider