Analyst Steven Milunovich of UBS told investors on Tuesday that he believes Apple’s iPhone Upgrade Program “could be a big deal.” In his view, the plan will cause some customers to upgrade their iPhone more often, boosting revenue for Apple.
Milunovich added that if Apple could lock enough customers into an annual upgrade cycle, the iPhone business would be like an annuity, which should sit well with Wall Street. Fellow UBS analyst Gareth Jenkins notes that in that case, the company’s stock could be worth over $200 per share.
Apple’s new iPhone Upgrade Program basically offers a two-year interest-free loan, which covers the cost of a new iPhone, as well as an AppleCare+ extended warranty. Customers pay for the device over 24 monthly payments, and have the option to trade the device in and upgrade to the latest handset after one year.
The new program presents itself as an excellent option for users who want the new iPhone every year, and who usually also buy AppleCare+ as a part of their yearly purchase. The plan also offers the ability to switch carriers or to use the device internationally, as the device is unlocked.
Milunovich says if just 15% of the U.S. installed iPhone base were to try Apple’s new plan by fiscal 2017, Apple would ship an incremental 9 million more iPhone units that year, seeing an additional 36 cents earnings per share.
A downside to the plan could be a flood of used iPhones on the market, as customers would trade-in their iPhones every year, however, that too could be a benefit for the Cupertino firm, as whether a device is used or new, the purchase still locks the customer into the iPhone ecosystem.