Here’s One Reason to Be Bullish on Apple: The iPhone 6

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If you ask Pacific Crest analyst Andy Hargreaves, Apple Inc. (NASDAQ:AAPL) is going to launch the iPhone 6 this fall, and it’s going to be a killer. Shares of the consumer tech giant jumped just more than 1 percent on Tuesday, after Hargreaves upgraded the stock from Sector Perform to Outperform on the back of this argument that Apple will charge $299 for the 4.7-inch phone and that it will sell like hotcakes.

This isn’t exactly a new argument — the iPhone 6 seems like the natural iteration of the flagship smartphone — but Hargreaves’s conviction is interesting. In a note seen by Business Insider, Hargreaves set a price target of $630, which is about 7.5 percent above the current mean price target and represents possible upside of about 17.3 percent as of March 11, when the note was published. Hargreaves also thinks Apple will release just one large phone this year, the 4.7-inch model, and not a 5.5-inch “iPhablet” that has been the subject of some speculation.

Still, Hargreaves anticipates that the 4.7-inch iPhone 6 will claim 32 percent of the market at the $299-plus subsidized price point, of which Apple currently claims zero percent. This is expected to cut in to Apple’s 66 percent share of the $199-plus subsided price point, reducing that share to 36 percent, but the transition, Hargreaves argues, would be profitable. He estimates the iPhone 6 will cost just $60 more to produce, giving Apple a nice fat margin on each upgrade. He expects the iPhone 6 to capture 35 percent of all iPhone replacement sales and to create as many as 10 million new customers who previously only had access to large-screen Android phones.

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