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Apple's iPhone release strategy mimics movie industry to maximize sales, analyst says

Key Points
  • Needham reiterates its buy rating on Apple shares, citing its smart, staggered iPhone release strategy.
  • “For the first time, the most expensive iPhones are available 5 weeks before cheaper iPhones, which is a release windowing strategy the movie industry has used for decades to maximize total revenue, " the firm's analyst Laura Martin says.
An attendee demonstrates the Apple  iPhone XR smartphone during an event at the Steve Jobs Theater in Cupertino, California, on Wednesday, Sept. 12, 2018. 
David Paul Morris | Bloomberg | Getty Images

Apple's decision to roll out its more expensive iPhones before its lower-priced model will pay big dividends for the company, according to Needham.

On Wednesday Apple announced its new iPhone XR model, priced at $749, will be released on Oct. 26. But its iPhone XS and XS Max phones, priced at $999 and above, will be available five weeks earlier, on Sept. 21.

This approach, while not completely comparable, is similar to the way the entertainment industry releases films, first through movie theaters, then a while later through the less-expensive rental market and then on to television, the analyst said.

"For the first time, the most expensive iPhones are available 5 weeks before cheaper iPhones, which is a release windowing strategy the movie industry has used for decades to maximize total revenue," analyst Laura Martin said in a note to clients Thursday.

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Apple shares closed up 2.4 percent Thursday.

Martin reiterated her buy rating and raised her price target to $260 from $220 for Apple shares, representing 18 percent upside to Wednesday's closing price.

Apple shares are significantly outperforming the market this year. The stock is up 31 percent year to date through Wednesday versus the S&P 500's 8 percent gain.

Last month Apple became the first publicly traded U.S. company to reach $1 trillion in market value.

— CNBC's Michael Bloom contributed to this story.