Nothing is more important to Apple Inc.’s (NASDAQ:AAPL) bottom line than iPhone sales. No other product dominates its revenue, and no other product has the same direct impact on the value of Apple stock.
According to recently published research, two moves Apple made with its iPhone lineup have made Android switchers a big part of that business.
That’s important with the slowing overall growth of the smartphone market. And with the expected makeup of 2018’s new iPhone lineup, those Android switchers may have an even bigger impact than usual.
Android Switchers and Apple Stock
In the early days of the smartphone market, iPhone sales were driven by convincing owners of regular cell phones to make the leap to a smartphone. That was relatively easy.
After that, it was the upgrade cycle, working with carriers to convince smartphone owners to upgrade to a new model every two years. These two massive waves propelled Apple stock to massive gains.
In a maturing smartphone market, sales get a little tougher. And with devices that are both more expensive and more capable, the two year upgrade cycle is harder to maintain.
So convincing someone to switch from one platform to another, “switcher” sales, become more important.
That’s more difficult because of brand and platform loyalty, and also because any investment in apps would be abandoned by switching to a new platform.
But according to new research from Consumer Intelligence Research Partners (CIRP) which was published by BGR, Apple is having considerable success in getting Android smartphone owners to switch to the iPhone.
According to CIRP’s data Android switchers make up 15% to 20% of quarterly iPhone sales. Two key (and at the time controversial) choices made by Apple appear to have significantly helped here.
First, with the iPhone 6 and 6 Plus, Apple went bigger, after years of claiming Alphabet Inc’s (NASDAQ:GOOGL) Google Android smartphones were too large to be user-friendly.
And with the iPhone SE, Apple went cheaper. Both of these factors are important to typical Android owners. CIRP’s data shows that Android switchers choose the low priced iPhone SE at twice the rate existing iPhone users do.
Among Android switchers, 40% are opting for Plus models, but they only buy the pricey iPhone X at half the rate existing Apple loyalists do.
If Apple gains so many Android users each quarter, how many iPhone users is it losing?
It’s tough to find statistics for switchers going the other direction. In part the data is spotty because the Android camp is made up of so many manufacturers, each with their own sales data.
What we do know is that in late 2016 it was estimated that 6% of iPhone users would switch to Android that year.
Boosting Apple Stock in 2018
We previously published an analyst’s prediction for Apple’s 2018 iPhone release strategy. If that analyst’s prediction holds true, those Android switchers may be more important to iPhone sales than ever this fall.
The analyst in question, TF International Securities’ Ming-Chi Kuo thinks Apple is going to slash the price of the iPhone X followup, add a new iPhone X Plus with a display larger than a Samsung Galaxy Note, and offer a big 6.1-inch LCD model for between $600 and $700.
The iPhone SE would remain in the line-up as the budget entry and Apple will undoubtedly continue selling some previous generation models, just as it currently offers the iPhone 6s and iPhone 7 series.
The key models in terms of Android switchers are that 6.1-inch LCD iPhone and the iPhone X Plus. The LCD model is expected to be priced in the range of the iPhone 7 Plus, and its display is even larger.
That combination of relatively low price and a big display hits a sweet spot for potential Android switchers.
The iPhone X Plus is expected to have a starting price at or lower than the the $999 iPhone X, but with a massive 6.5-inch display that would be even larger than Samsung’s 6.3-inch Galaxy Note 8.
Big displays are a big deal for Android switchers.
The Bottom Line on Apple Stock
The importance of those Android switchers hasn’t been lost on Apple, which has been running ads lately targeting Android smartphone owners.
We’ll have to wait for this fall’s iPhone launch to see how this all plays out.
But with Android switchers making up a solid chunk of iPhone sales and representing a net gain over those that abandon iOS, Apple is better positioned than most to continue solid sales.
This is true despite the overall cooling of the smartphone market.
Plus, the expected 2018 iPhone release mix seems ready to prime the pump for both Apple loyalists and dissatisfied Android owners, setting the stage for an Apple stock boosting quarter.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
