Pacific Crest Securities analyst Andy Hargreaves boosted Apple, raising it to "outperform" with a $635 price target, as he believes the next iPhone, which he calls the iPhone 6, could be priced higher than the iPhone 5s, and return growth to Apple in fiscal 2015.
"We believe Apple can sell a 4.7" iPhone at a subsidized price of $299, which should generate incremental gross profit on replacement sales and attract new customers that had previously purchased Android phones specifically for a larger screen," Hargreaves wrote in a note.
Speculation has surrounded the Cupertino, Calif.-based Apple on whether it will increase the size of the iPhone to better compete with smartphones using Google's (GOOG)Apple shares were higher following the upgrade, gaining 0.49% to $533.50 in premarket trading on Tuesday. See Also: What Will Apple's Next iPhone Look Like? "We expect iPhone replacement rates to remain stable for the foreseeable future, which should underpin strong cash flow to fuel Apple's cash return activity and a still growing net cash balance," Hargreaves wrote in the report.