The 'Mother Lode' Of All Apple Upgrade Cycles Is Coming This Summer With Two New iPhones, Says ISI

There's a very bullish note on Apple this morning from ISI.

It says, "the 'mother lode' of all Apple upgrade cycles" will happen this year when Apple releases two new iPhones with big screens.

It's predicting Apple releases a 4.7-inch iPhone and a 5.5-inch iPhone this year.

"'Large-screen envy' is prevalent among the iPhone installed base and we believe a ~5" form-factor iPhone would spark a massive upgrade cycle as well as many 'Android switchers' returning back to the iPhone," says ISI.

Here's the explanation of how the upgrade could impact Apple:

We estimate the current iPhone installed base to be about 260mil users (roughly equivalent to the last 7 quarters worth of iPhone units). By our calculations, we estimate slightly over half of iPhone sales today go to upgrades (with the majority of new users coming from international markets). However, we believe that while the upgrade rate (i.e., % of installed base upgrading their device in a given quarter) had hovered in the 10-11% range over 2011-12, it has now dropped closer to 9% as users find few compelling reasons to upgrade. In peak quarters, the upgrade rate has reached the ~12-14% range and we expect a similar upgrade rate in 2H14 for iPhone 6, if not better. We believe this could drive ~$3.00 (or ~10-15%) EPS accretion over 2H14 assuming an incremental ~3% of the base upgrades each quarter.

This is yet another analyst group saying Apple releases two phones this year.

It would be a major departure for Apple, which has only ever done one iPhone at a time since it released the iPhone in 2007.

Because it would be such a change of pace, we're skeptical it's really going to happen. We'll believe it when we see it.

But, there is a lot of noise around the idea that Apple would do two phones, so we're more inclined to believe it's going to happen as people keep talking about it.