Will the Apple iPhone 6s Flop or Fly? Here's How to Find Out.

Now that you’ve seen the new Apple iPhone 6s and 6s Plus, how can we tell if it’s a success?

We’ll have to be patient. But over time, we’ll be able to judge its success using three key metrics:

1. Will the latest model account for 70 percent or more of total iPhone sales in the launch quarter, as it has in the past? In other words, can Apple sell between 54 million and 56 million of the new phones by the end of the year?
2. Will Apple maintain or improve its global smartphone marketshare of 16.3 percent next year?
3. Will it boost overall iPhone sales by high single-digit percentages, or between 240 million and 249 million phones in the next fiscal year?

We arrived at these figures by examining the past. By now, it’s well known that Apple’s transitional “s” model iPhones typically produce more modest sales gains than the full upgrade versions. Incremental improvements like a faster chip, upgraded camera and a new screen won’t boost smartphone revenue by 60 percent this coming year as it did in the first nine months since the iPhone 6 was launched.

The iPhone’s first report card arrives in the first fiscal quarter ending Dec 31 of the launch year. In one of its best performing “s” model launches, the iPhone 4s, the 2011 smartphone that introduced the Siri digital assistant, accounted for 70 percent of the 37 million iPhones sold in the December quarter, according to Strategy Analytics. That model helped lift overall sales by triple digits — by 128 percent — over the prior year’s quarter.

But not all “s” models achieved such growth. The iPhone 5s captured 66 percent of the company’s smartphone sales in its introductory quarter, according to International Data Corp. Though the smartphone was the first of Apple’s mobile devices to offer the Touch ID fingerprint sensor, that feature wasn’t enough to make a meaningful difference. In the launch quarter, Apple’s smartphone sales rose by a modest 7 percent following its September 2013 introduction — one of only two times that Apple posted less than double-digit gains in the inaugural quarter of one of its newly introduced phones.

For the iPhone 6s and 6s Plus to sizzle, the new models will need to account for 70 percent of the 77 million to 80 million smartphones that several analysts we spoke with estimated Apple will sell in the fiscal first quarter. The company typically has refused to break out the figure, which will require third-party analysis to determine if the “s” model hit the 54 million to 56 million unit mark.

The next target to focus on is Apple’s ability to maintain or improve its global marketshare during the transitional period. The company has seen its share of the worldwide smartphone market rise from a modest 5.3 percent in 2008 to 16.3 percent this year, according to estimates from research firm Gartner. Its share hasn’t dipped below 14 percent since 2010 — and shouldn’t budge if this next-generation iPhone appeals to global consumers.

“This might be tough, in the face of how well they did with the launch of the [iPhone] 6 and 6 Plus,” said Gartner analyst Tuong Nguyen. “Those were enormous hits that pulled down a lot of volume, as well as shifting the market share around.”

From a financial prospective, the final and most reliable gauge of success is annual sales of all iPhones, not just the “s” model. Historically, each new model’s introduction has helped lift sales of the existing models as well. Apple shipped a record 183.2 million iPhones since last September’s introduction of the iPhone 6 and 6 Plus, on the way to reaching a projected 223.7 million in its first year, according to IDC forecasts.

Several analysts think Apple will ship even more iPhones in the coming year, though the gains will likely be measured in single-digit percentages. Concerns about the slowing economy in China, a market that now accounts for more than a quarter of Apple’s revenue, have already taken a toll on Apple’s market valuation. The company has shed more than $130 billion in market valuation since July 20 — though Apple’s stock has rebounded since chief executive Tim Cook took the unusual step of emailing CNBC host Jim Cramer to say the company was still seeing strong growth in the region.

What is working in Apple’s favor is that only 27 percent of current iPhone owners have upgraded to the iPhone 6 or 6 Plus as of the end of June, Cook told analysts, making a case that there’s much more room for growth than most expect. In other words, most iPhone owners have clung onto old phones and may finally be ready to replace them.

Once Apple ships the iPhone 6s and 6s Plus, prices will likely drop for the previous generation of phones, potentially spurring another wave of buying among the price-conscious. Others will pick up the new iPhones as they come off of two-year contract cycles.

Carolina Milanesi, chief of research for Kantar Worldpanel, said roughly one-third of sales for the iPhone 5s came after the launch of the iPhone 6. Mobile carriers encourage purchases of these generation-old devices by offering plans with low or no down payments and cheaper data plans.

Another factor working in Apple’s favor is a big change in how U.S. wireless carriers market device purchases. Carriers that once locked consumers into two-year contracts in exchange for a lower up-front price for hot new phones are now urging customers to finance their phones by paying monthly installments. These types of plans also offer options to pay higher monthly installments in order to qualify for upgrades as quickly as one year later, which could spur the tech-savvy to upgrade more often.

“Now that we’re out of this structured environment where everyone’s on a 24-month contact … you’re going to see upgrade rates at historical highs,” said BTIG’s Walter Piecyk. “That will drive strong smartphone sales in the U.S. and in other developed markets.”