Investors have gobbled it up and shares have already gained 17% this year, trouncing the broader market.
But its stock could go higher yet still, says a recent note from Citi, joining bulls like billionaire activist investor Carl Icahn, who recently argued that Apple is actually worth more than $1 trillion. Today's market cap stands at roughly $750 billion, a week after hitting the $700 billion line.
Here are five reasons Apple could continue to reach new heights, pointed out by Citi analyst Jim Suva.
1. People are upgrading their phones more often. No longer is it the norm to wait two or more years for a free cellphone upgrade from your wireless carrier. The Verizons and AT&Ts of the world have begun offering deals to existing customers so they can more frequently and affordably upgrade their phones.
Plus, as evidenced by the lines that materialize around the world every time a new iPhone is released, there's already huge demand to get the latest version right away. Apple said it sold over 10 million iPhone 6 and iPhone 6 Plus models in the three days following its launch in September. In that quarter, it went on to sell 74.5 million iPhones, equivalent to 34,000 iPhones every hour of every day.
"We believe upgrades to the screen size, battery life, camera, biometric authentication and services like Apple Pay/Passbook are additional reasons for consumer desire to upgrade their devices," writes Suva.
How many phones could Apple sell in 2015? By Citi's count, it could hawk more than 200 million devices. If you consider that Apple's market share for smartphones is in the single digits, there's still lots of room on the runway.
2. The stock is cheap. Apple trades at a multiple of 15, compared to
Plus, Apple is expected to raise shareholder value by increasing its share buyback program and boosting its dividend.
3. Margins can continue to rise. As people rely on their phones for more and more things -- like apps and high-quality photos and videos -- expect them to pony up for higher-memory phones, says Citi. The extra gigabyte option that costs a customer $100 more only costs Apple about $20 extra to make, translating into an 80% incremental gross margin.
Apple can become more profitable as consumers "permanently shift their preference to higher memory in their smartphone despite the higher costs," writes Suva. In the latest quarter, Apple's margins rose to 39.9% from 37.9% a year earlier.
4. Apple Pay and Passbook have big potential. Apple Pay has garnered a lot of attention recently, but Citi is looking beyond that to the "tremendous upside potential" of Passbook as a complete digital wallet and Apple Pay as one component. The idea is that people use their iPhone to pay for coffee as well as to house their digital keys, airline boarding passes, drivers licenses, loyalty cards and healthcare identification.
While the idea isn't new, its success depends on widespread adoption and Citi says recent announcements bolster the view that this could take off. For instance,
There could be "significant innovation that could lead to additional economics for Apple," says Suva.
5. Apple doesn't just have to be a consumer brand. While Apple has "correctly focused" on creating highly-desired consumer products, "now that this has taken shape with tremendous traction, we foresee Apple investing efforts to make new traction in the corporate environment," says Suva.
For instance, it has a new partnership with
Given Apple's meteoric rise, you could be forgiven if you think the stock has plateaued. "It is not uncommon for investors to question share gain potential from hereon," says Suva.
