Analyst Upgrades Apple, Says the iPhone 6 Will Be Huge

Apple is getting an upgrade. 

Andy Hargreaves at Pacific Crest upgraded Apple to "outperform" from "sector perform" and gave it a $635 price target. 

The reason for the upgrade: Apple will release a 4.7-inch iPhone 6 in the fall. Apple will charge $299 for the phone on-contract, which is $100 above what it charges for the iPhone 5S. That will boost sales and earnings.

Apple consumers are relatively rich, so $100 doesn't mean too much to them. The failure of the iPhone 5C as evidence that Apple's customers don't mind spending an extra $100 for a better product.

Apple released the iPhone 5C, which cost $100 with a two-year contract. The iPhone 5S was $200. Over the life of a phone, which is two to four years, that $100 isn't all that much. As a result people skipped the 5C for the better 5S.

Because Apple customers have shown they don't mind paying a slight premium, and also Apple can charge $100 more for the newer, bigger phone. We know that Samsung charging $299 for the Note, a bigger 6-inch phone, as evidence that you can charge more for a big phone.

Apple does two big phones this year. Expecting a 4.7-inch iPhone and not an additional 5.5-inch iPhablet like some were speculating would happen.