Apple Inc. (NASDAQ: AAPL) should "handily" beat Wall Street estimates in next week's earnings report after the iPhone maker took advantage of a strong holiday season, according to Wedbush.
Daniel Ives maintains an Outperform rating on Apple's stock with a price target lifted from $350 to $400.
Wedbush's incremental bullish stance on Apple is based on "overwhelming positive data points" coming out of the company's supply chain, Ives wrote in a note. These include "robust" iPhone 11 shipments and "jaw-dropping" AirPods momentum. As such, Apple remains a "must-own stock" through an upcoming transformational 5G supercycle over the next 12 to 18 months.
In fact, out of 925 million iPhones in existence, the upcoming 5G cycle could see 350 million phones upgraded when the next models are launched. Investors wondering if they missed out on the rally face an easy to understand the answer: "a resounding no."
Apple could hit the $2 trillion valuation milestone by the end of 2021 from a combination of 5G demand and a Services business that continues to grow and command a higher valuation, the analyst said. Apple's market cap sit around $1.4 trillion today.
The stock has re-rated higher over the past year, but Ives said in a CNBC interview Apple's stock is only halfway through a re-rating cycle. Part of that is due to the Services business, which should be valued by itself near $650 billion based on $60 billion in annual sales.
"In our view, the monetization of the installed base is just starting to happen here," Ives said. "The next few years I think we start to get to the sweet spot."
Shares of Apple hit a new all-time high at $323.33 on Friday. The company reports earnings after Tuesday's closing bell.