Bank of America analysts believe market expectations for Apple (NASDAQ:AAPL) iPhone sales are too low. Their analysis suggests replacement cycles are shortening due to a growing installed base exceeding 2.2 billion units.
"We view the installed base (IB) as a key indicator of the potential of Apple's ecosystem," states the Bank of America note. Analysts estimate that replacement cycles alone could drive iPhone unit sales of 230 million and 241 million in calendar years 2025 and 2026, respectively. This surpasses analyst consensus projections of 241 million and 238 million for the same period.
Bank of America highlights the significant growth of the used iPhone market, which they project to continue expanding at a faster pace than new phone sales. This growth, coupled with a larger overall installed base, is expected to drive further service adoption and sales of additional devices within the Apple ecosystem, often referred to as the "halo effect."
While Apple boasts over 1 billion paid subscriptions across its services, Bank of America sees room for significant growth. With less than half of the installed base currently monetized through services, there's ample opportunity to expand service penetration, particularly as the used iPhone market grows and attracts more price-conscious consumers.
Bank of America concludes by emphasizing the value of Apple's user base. The ability to connect this affluent user base with various technologies, such as search engines or app developers, has proven lucrative for Apple. Looking ahead, Bank of America sees potential for Apple to leverage its user base in a similar way with artificial intelligence (AI) and maintain pricing power on both hardware and services.
