Apple Inc. (NASDAQ:AAPL) may be ready to concede that size matters in the smartphone world.
Topeka Capital Markets analyst Brian White believes that bigger iPhones are one the way.
Now, before we get ahead of ourselves — dreaming of larger smarpthones and even fabled phablets — let’s frame this note appropriately. White has been known to dream big and wake up empty.
White turned heads last April when he slapped a price target of $1,001 on the stock. Two months later he suggested that the ballyhooed Apple HDTVs could hit the market in time for the 2012 holiday season. Neither vision materialized. A year later, Apple Inc. (NASDAQ:AAPL) stock is trading at less than half of his price target. Anyone asking Santa for an iTV last year had to settle for an iPad Mini and a bag of coal.
However, he may be on to something this time.
White is trekking through Asia, visiting Chinese and Taiwanese suppliers that Apple and other consumer tech giants rely on for prototypes and eventual production runs. If a source in Apple Inc. (NASDAQ:AAPL)’s supply chain is pointing to two — and possibly even three — different screen sizes for this summer’s inevitable iPhone 5S rollout, it’s a better wager than an analyst at home engaging in wishful thinking.
Go big or go home
The market initially applauded Apple’s decision to bump up the size of the iPhone 5. Going from 3.5-inch screens to 4-inch screens gave the stock a boost. Apple Inc. (NASDAQ:AAPL) shares peaked the day that the iPhone 5 hit the market.
However, with Samsung and HTC embracing larger standards at 5 and 4.7 inches, respectively — and Google Inc. (NASDAQ:GOOG)‘s Android continuing to run away with the market — Apple can’t ignore the call for wireless devices with larger screens.
The iPad recognized the market demand for smaller tablets by rolling out the wildly successful iPad Mini. Now it’s time to realize that the even the bigger iPhone 5 may not be big enough.
Analysts have been disappointed to see iPhone buyers flock to the older iPhone 4 and 4S models, but wireless customers aren’t going that route because they want smaller screens. They’re merely being won over by the notion of saving $100 or $200 on their phones.
Research In Motion Ltd (NASDAQ:BBRY)‘s Z10 is off to a slow start this year, and it wouldn’t be a surprise to see the smartphone pioneer suffer another sequential dip in subscribers this quarter. Nokia Corporation (ADR) (NYSE:NOK) flooded the market with Lumia phones, and even Microsoft Corporation (NASDAQ:MSFT)‘s marketing muscle to push the Windows Phone-fueled devices failed to slow Android’s momentum.
Against this backdrop we have Samsung’s 5-inch Galaxy S4 coming out later this month, and there’s plenty of chatter of Samsung introducing devices with 5.5-inch and 6.3-inch screens later this year. This would naturally be phablet territory, and Samsung has already fared well there with the Galaxy Note line. If Apple Inc. (NASDAQ:AAPL) is going to go bigger than the iPhone’s 4-inch screen — and if it is introducing three sizes, as White is hearing could happen — doesn’t it stand to reason that one would be a Galaxy S4-sized smartphone rival and the other would be even larger to take on the intriguing phablet market?