Business Corpus: Why Apple Is Focused On Making Bigger-Screen iPhonesWhen Apple introduces its latest iPhones on Sept. 12, it is expected to show off three new handsets that have displays as big or bigger than the company's largest-screen handset to date. The post Why Apple Is Focused On Making Bigger-Screen iPhones appeared first on Investor's Business Daily.

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When Apple (AAPL) introduces its latest iPhone lineup on Sept. 12, it likely will show off three new handsets that have displays as big or bigger than the company's largest-screen handset to date.

Consumers have shown a preference for smartphones with larger displays and are willing to pay a premium for the feature. That will give Apple pricing power with its 12th-generation iPhones, KeyBanc Capital Markets analyst Andy Hargreaves said in a report Tuesday.

"New iPhone pricing is likely to be slightly above current sell-side expectations, which could provide a positive catalyst for fiscal 2019 consensus revenue and (earnings) expectations," Hargreaves said. Apple's fiscal 2019 starts Sept. 30.

But iPhone pricing likely will peak with the new models, he said.

New iPhones Could Cost More Than Expected

Analysts expect Apple to come out with an updated version of its 5.8-inch OLED screen iPhone X, which is currently its largest-screen iPhone. The new handset could be called the iPhone XS.

Apple also likely will introduce a 6.5-inch OLED screen handset, possibly called the iPhone XS Plus.

Finally, Apple is seen coming out with a 6.1-inch LCD handset, possibly called the iPhone 9.

Hargreaves thinks Apple will price the iPhone XS starting at $949, vs. the consensus expectation of $899. The current iPhone X starts at $999.

He believes Apple will price the iPhone XS Plus at $1,049, vs. the consensus view of $999.

He sees the iPhone 9 starting at $749, in line with views.

Bigger Screen Sizes Drive Pricing Power

"Over the last six years, screen size is the lone feature that we believe has demonstrated a consistent ability to drive both volume and pricing power," Hargreaves said. "This was evident in the iPhone 6 cycle, where a step-up in screen size drove both pricing and volume, and in the iPhone X cycle, where a larger screen in a similar-sized form factor drove strong pricing power."

But Apple is reaching the limit for screen sizes that can still fit in pants pockets, Hargreaves said.

Rival Samsung is working on a smartphone with a folding display that would give its handset more screen real estate. Samsung will unveil its foldable smartphone later this year, DJ Koh, chief executive of Samsung's mobile division, told CNBC.

Hargreaves rates Apple stock as sector weight, or neutral.

Apple Stock Gets Another Price-Target Hike

Elsewhere on Wall Street, Morgan Stanley on Wednesday raised its price target on Apple stock to 245 from 232 and reiterated its overweight rating.

Apple stock dipped 0.7% to close at 226.87 on the stock market today. Earlier in the session, it notched its sixth record high in as many trading sessions. It hit an all-time high of 229.67 in morning trading before reversing.

On Tuesday, Canaccord Genuity and RBC Capital Markets raised their price targets on Apple stock.

Apple Streaming Video Service Taking Shape

Morgan Stanley analyst Katy Huberty sees great potential for Apple's planned streaming video service. She noted that Apple is spending about $1 billion on video content for the service this year alone. It has procured 24 new shows and forged content partnerships with the likes of Steven Spielberg, Oprah Winfrey and Sesame Workshop.

If Apple were to launch its service at $7.99 a month, it could reach over 50 million paid subscribers by 2025, she said. Huberty thinks Apple will price its service below competitors such as Netflix (NFLX).

Apple could decide to bundle its video service with its streaming music offering, Apple Music, and digital news and magazine subscription service, Texture, and charge $12.99 a month, she said. Huberty called the bundle the "Apple Media" service.

"From a financial perspective, we believe there is clear reasoning as to why Apple would pursue the Apple Media bundle," she said. "However, we believe the most likely option will be a combination of both — i.e. offer Apple Video as a $7.99/month stand-alone option but also offer the Apple Media bundle for $12.99/month."

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