"Our positive volume outlook for 2020 is driven by our current expectation for the launch of four iPhone models ... and more significant spec upgrades," Samik Chatterjee, an analyst at J.P. Morgan, wrote in the report.
Apple typically releases new iPhones in September, in time for a massive holiday season, and then sees slower sales until the next devices come out the following September. The success of each cycle is driven by many factors, including the number of people with older phones ready to upgrade as well as the overall economic conditions around the world.
But one factor that reliably drives a big iPhone cycle is new features. Chatterjee predicts that there will be several new selling points in 2020, such as organic light-emitting diode (OLED) displays, high-speed modems, and virtual reality features.
From Monday's note:
"Our expectations include all three Sep-2020 iPhones (5.4"/6.1"/6.7" screen sizes) will adopt OLED displays and 5G baseband modems (with support for mmWave frequencies), and at least two of the three models adopting world facing 3D Sensing (Time of Flight) driving industry leading AR/VR capabilities which can be leveraged by custom built applications (including games)."
Currently, the iPhone XS and the iPhone XS Max use OLED screens, which have power and image quality advantages, but are more expensive than the LCD screens used on many smartphones, like Apple's iPhone XR.
Upcoming 5G networks have the potential to dramatically increase cellular download speeds, if carriers can build out the technology in time. Apple's current devices have 3D-sensing cameras on the front, and the J.P. Morgan analysts predict that in 2020, they will be equipped with similar cameras on the back.
Based on his team's research, Chatterjee increased J.P. Morgan's year-end price target on Apple's stock to $239 from $233, representing a 19% increase from Monday's close. J.P. Morgan predicts Apple will sell 195 million iPhones in 2020, up from an estimated 180 million in 2019. The company stopped disclosing unit sales at the end of fiscal 2018.
Chatterjee said he also sees Apple going after "a much more 'value' category than it has been used to with its recent launches." That could be a lower-cost iPhone in 2020 that's the same size as the iPhone 8 but without a 5G modem or OLED display.
For the upcoming launch in September 2019, Apple is expected to release three new iPhones, though they will likely not include 5G modems or a major redesign.