Two analysts at Pacific Crest Securities have a new, arguably provocative thesis on Apple (AAPL) - Get Apple Inc. (AAPL) Report : user loyalty matters much more than innovation for driving iPhone 7 sales.
Pacific Crest's Andy Hargreaves and Evan Wingren wrote in a report on Sunday that trends of current iPhone users matter more than creating market upheaval with its next version of the device due out later this year, an argument that goes against conventional Wall Street wisdom.
"Sentiment around the iPhone 7 cycle has grown increasingly negative in recent months and the prevailing view now seems to be that a lack of innovation in the device will impair purchases and drive further declines in iPhone unit volume in [fiscal year] 2017," the analysts wrote. "We believe this is wrong."
Separately, Barrons reported early on Monday that Apple had asked its suppliers to prepare for higher-than-expected production of the iPhone 7 this year, causing shares to rise 1.6% to $96.73 in mid-day trading on Monday.
The Pacific Crest analysts estimated that more than 100 million people have switched to the company's signature device during the iPhone 6's run, which could result in 30 million additional upgrades compared to when the company released the iPhone 6S, the most current version of the iPhone. Hargreaves and Wingren also expect iPhone sales to new users to decline by less than 10 million units during the iPhone 7 cycle, compared to a much bigger decline of around 30 million units for the 6S cycle.
"This combination of growing replacement volume and a moderated decline in sales to new users is very likely to drive growth for the iPhone 7 cycle as a whole, regardless of innovation in the device," the report read.
Wingren deferred comment to Hargreaves, who was not immediately available for comment.
The Sunday report came shortly before the Cupertino, Calif.-based tech behemoth CEO Tim Cook acknowledged the iPhone might be a little too pricey in India in an interview in India with NDTV CEO Vikram Chandra, who noted the iPhone is more expensive than it is in the U.S. and doesn't have some of the features it has here for various reasons.
"So you've got an iPhone here that is more expensive than it is in the U.S.," Chandra said, "with less than functionality that it would have in the U.S. and in a country where purchasing power is a fraction of what it is in the U.S, and that sets up a problem for you in being able to scale [the iPhone]."
"I recognize the prices are high," Cook said. "We want to do things that lower that over time to the degree that we can, so we are looking at a number of different things. What we wouldn't do it lower our quality bar, and so we are only going to make a product that we think is a great product. And that means that we aren't going to compete in some of the price bands."
Jim Cramer said Apple analysts haven't factored India enough into the company's longer-term future, and that the nation could play an important role going forward.
"I really think the analysts have underplayed India over and over and over again," said Cramer, TheStreet's founder and manager of the Action Alerts PLUS portfolio, which owns Apple. "Remember, I do not expect a good quarter from Apple -- and that means if you're in the stock for hot money, you'll be wrong -- but I like the longer term."