Family Hotels In Miami - Apple Needs To Sell Bigger iPhones – Or Cheaper Ones

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Apple Inc. is still a couple weeks away from reporting results for the fourth fiscal quarter that will include the launch of the iPhone 5S and 5C models, but some Wall Streeters already have their eyes further down the product cycle.

Apple’s shares got a lift on Monday — up 1.7% to $491.41 at last check — after Jefferies & Co. analyst Peter Misek upgraded the stock to a buy rating. In his note,  he said he still sees some risk to the company’s recently ended fiscal year and December quarter in terms of iPhone sales. He thinks better pricing from suppliers will boost margins and “allow Apple to skate by until iPhone 6 launches with its 4.8″ screen.”

Of course, Apple AAPL  has never confirmed that it is even working on such a device, though a growing number of analysts believe the company has a large-screen iPhone in the works for a launch next year.

However, a large-screen iPhone may not address the other problem some see in Apple’s iPhone lineup.

Toni Sacconaghi of Bernstein put it succinctly in a Monday morning report entitled: “Are There Enough Wealthy People in the World to Sustain iPhone Unit Growth?”

In his report, Sacconaghi estimates that the company will have to essentially find about 125 million new iPhone buyers in the next two years in order to meet Wall Street’s projections. These would be new customers to the iPhone — not those already using a version smartphone and upgrading. This is based on his estimates that a majority of total iPhone sales in the past three years have been to new customers. Sacconaghi says Apple’s continued focus on this segment keeps the company from better growth opportunities at the lower end.

“On balance, while many things can change and Apple could ultimately eclipse our iPhone expectations for the next two years, the fact remains that only a finite number of users globally can afford a $450+ smartphone, and most of them already own such a device, meaning that growth will invariably continue to slow for Apple’s iPhone business, particularly once carrier additions are complete,” Sacconaghi wrote.

The up-coming earnings report later this month (no date has been set yet) will give further indication of how the new iPhones did in their launch period, and what the company’s expectations for the December quarter will be. But others also see Apple facing limits. Kulbinder Garcha of Credit Suisse predicted on Monday that Apple’s product portfolio will remain in the high-priced segment for the next year.

“This segment has seen peaked growth – with 300 million units sold per year and only modest expansion,” he wrote. “Critically, by ignoring the mid-tier smartphone segment, Apple will continue to lose users to the Android ecosystem.”

Apple CEO Tim Cook will likely have a chance to field these sorts of questions on the company’s next earnings call, though worth noting that he took some pains around the iPhone 5S launch to broadcast that “we’re not in the junk business.”