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People Are Waiting Four Years to Upgrade iPhones, Analyst Says. That’s Not Good for Apple

It’s been a tough several months for Apple. The company’s stock has lost more than a quarter of its value since October. Its exposure to China’s slowing economic growth is weighing on its sales. And, perhaps most worryingly, people are just waiting longer before they upgrade to a newer iPhone.

When Apple reported earnings late last month, CEO Tim Cook made the case that the company is moving to address slower iPhone unit sales, including a new push on subscription services and offering some relief—through new trade-in programs—on iPhones priced at $1,000 and above. That soothed investors who were rattled by Cook’s earlier surprise warning that the quarter’s revenue would disappoint.

Apple’s stock has risen 20% since the warning of slower revenue growth on Jan. 3. But analysts are starting to express concern that the lengthening replacement cycles of iPhones is only going to get worse. On Friday, Bernstein analyst Toni Sacconaghi said in a research note that “current upgrade rates have slowed dramatically and may be lower than investors realize.”

In fiscal 2018, Sacconaghi said, people were waiting three years on average to replace their iPhones. But that cycle is “elongating” to something closer to once every four years in fiscal 2019.

“In our view, the single most important controversy surrounding Apple today is the iPhone replacement cycle,” Sacconaghi wrote. “Despite the iPhone installed base growing +9% last year, we now expect units to be down -19% in fiscal 2019, implying a material pushout in upgrade rates.”

Another analyst, Timothy Arcuri of UBS, said last week that he expects iPhone sales to be sluggish in 2019 and may not recover until Apple introduces a next-generation smartphone, likely in the fall of 2020.

Apple’s stock rose 20 cents a share, or 0.1%, to close at $170.41 a share Friday.