iPhone sales likely to increase due to 5G, AR/VR: BofA

Apple Inc is likely to see an increase in iPhone sales, thanks to the rollout of 5G networks around the world, as well as the possibility of augmented/virtual reality glasses to come later this year, Bank of America said in an investment note.

Analyst Wamsi Mohan noted that as the world comes out of the pandemic, replacement cycles for smartphones are “re-normalizing,” pointing out that a January 2022 survey found that 30% of respondents are likely to upgrade their phones every year, higher than the 23% in March 2020, but still below the 32% seen in December 2019. Mohan reiterated the firm’s buy rating and $215 price target, some 23% higher than current levels.

“Overall intent to upgrade to an iPhone has been trending positively with corresponding drop in intent to purchase competitor phones,” Mohan wrote. “Our survey also suggests that outside of 5G, the launch of AR glasses can further drive a replacement cycle for iPhone. This is supported by our survey wherein a large market like China, 20% of respondents showed willingness to upgrade to some model of iPhone supporting 5G in order to have a better AR/VR experience.”

Apple shares were down slightly less than 1% to $171.17 in premarket trading.

In addition, Mohan found in the survey that more than 25% of respondents had an iPhone 8 or older, which is an “opportunity for driving a replacement cycle,” coupled with the fact that intent to purchase an iPhone in China has increased “significantly” due to a price cut for the iPhone 13 and no real competition from other high-end phone.

The analyst also pointed out interest in Apple’s services are likely to drive growth, as 34% of U.S. respondents and 32% of U.K. respondents said they were interest in subscribing to Apple’s service bundle, known as Apple One, which includes Apple Music, Apple TV+, Apple Arcade and iCloud+. Seeking Alpha