Analysts are not expecting new revolutionary devices to be revealed at Apple Inc.'s annual product launch Sept. 10, but think refreshed iPhones could boost the company's emerging services business.
Evercore ISI analyst Amit Daryanani expects Apple to release a trio of new iPhones equipped with a completely redesigned camera system, including the addition of a third rear camera that is expected to improve low-light photos. The pricing of the phones should remain consistent with the company's current "X-gen" line-up, Daryanani noted, ranging between $999 and $1,099 for the higher-end models and $749 for a cheaper version.
The IT hardware analyst does not expect the new features to offer a "compelling" reason for users to upgrade, but he said they should lay the foundation for strong services growth in the future.
"While we understand iPhone units (and sales) will remain muted through FY20 (5G launch), the narrative has and continues to shift towards services and a higher mix of recurring revenue for Apple," Daryanani wrote in a Sept. 8 research note.
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The iPhone remains Apple's most popular consumer product, driving the lion's share of the company's total revenue. But sales of the iconic iPhone have declined in recent quarters as the smartphone market matures and consumers hold onto their phones longer. The device's unit sales revenue decreased to $26 billion in the quarter ended June 29, from $29.47 billion a year earlier.
Nevertheless, the product launch presents a key opportunity for Apple to lock in its "unparalleled" consumer base, Wedbush Securities analyst Daniel Ives said in a Sept. 9 research note. Ives, who covers the technology sector, predicted that roughly one-third of the company's 900 million global active iPhone users are in a "window of upgrade opportunity" over the next 12 months to 18 months, and he believes this new product cycle could lead to about 180 million iPhone units sold in fiscal year 2020.
"Overall, we view this week's launch as putting fuel in Apple's growth tank which is much needed as [the company] navigates mature secular smartphone headwinds," Ives wrote.
For his part, Timothy Lesko, partner and portfolio manager at Granite Investment Advisors, thinks it is not necessary for Apple to introduce revolutionary iPhones each year, but rather ones that offer "incremental improvements" in order to continue enhancing the consumer experience.
"I would disagree with the idea that the next iPhone needs to be something the iPhone isn't now," Lesko said in an interview. "It's just going to be another incremental improvement, but that is exactly what Apple has been trying to create for 30 years, continuing to lead in technology, but make something that makes people's lives easier."
In addition to new iPhones, Apple is also expected to announce more details on its upcoming services offerings, including Apple TV+ and Apple Arcade.
The Apple TV+ subscription streaming service will feature exclusive original video content, including content from A-list celebrities, while Apple Arcade is the company's first gaming subscription offering. The company has not released pricing details or a launch date for either service.
In terms of hardware, analysts also expect the tech giant to reveal upgraded versions of the iPad Pro tablet with an upgraded camera and faster chips; an entry-level iPad with a bigger screen; new versions of the Apple Watch; and a revamped MacBook Pro laptop.
Apple's product refresh event will be livestreamed here at 1 p.m. ET.

