Fiercely loyal consumers helped Apple Inc.’s (NASDAQ:AAPL) iPhone 5s to become the best-selling smartphone in the U.S. in March, but maintaining the lead might prove to be a challenge as rivals seek to narrow the gap with snazzier products.
In March, the iPhone 5s was the most popular product -- in terms of sales -- at each of the four major carriers in the U.S., including AT&T Inc. (NYSE:T), Verizon Communications Inc. (1NYSE:VZ), Sprint and T-Mobile US Inc. (NYSE:TMUS), T. Michael Walkley, an analyst at Canada’s Canaccord Genuity wrote in a Thursday report, obtained by AppleInsider. According to the report, Samsung Electronics Co. Ltd.’s (KRX:005935) Galaxy S4 took the second position at AT&T, Sprint and T-Mobile, while HTC Corp’s (TPE:2498) new HTC One M8 was the runner-up at Verizon.
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Apple will find it harder to retain its leadership position as many consumers are believed to be waiting for the release of the HTC One M8 on carriers other than Verizon, and the launch of Samsung’s new Galaxy S5. And, both products could sorely test the loyalties of Apple fans, according to Walkley, who expects the launch of these new Android handsets could pull Apple down from its top spot next month.
But, the arrival of the so-called next-generation iPhone 6 -- widely expected to be launched in the third quarter -- could help Apple claw its way up to the top again, Walkley said, in the report.
“We believe Apple will win back meaningful high-end market share during H2/C2014 based on our belief new iPhones with larger screen sizes could create a strong upgrade cycle among Apple's loyal base,” Walkley wrote.
In addition to the release of a new iPhone, another factor working in Apple’s favor is the increasing number of consumers who prefer new service plans that offer early-upgrade options instead of a two-year contract that hugely subsidizes the handset’s price. According to Walkley, early-upgrade plans could help Apple expand its growth in mature markets, where the majority of customers already own the most recent iPhone models.
Here is an excerpt from Walkley’s note:
With our surveys indicating strong customer loyalty for the iPhone, we believe Apple could strongly benefit from a broader adoption of these early upgrade plans. Further, with these plans facilitating annual upgrades to new smartphones, we believe these plans in the coming years could in fact boost iPhone replacement sales and help Apple grow sales in the more saturated and mature developed countries that sell a greater mix of high-end smartphones.
Walkley maintained a “buy” rating for Apple stock and offered a target price of $600.