Apple (NASDAQ: AAPL) stock has seen some undeniable momentum recently. Shares have surged an impressive 47% over the past 12 months and 22% in the past 3 months alone. Further, the stock is trading just $4 from an all-time high at the time of this writing.
Despite the stock's wild run-up, some analysts remain bullish on the tech giant's shares. Indeed, two major analysts hiked their 12-month price targets this week, with one analyst betting Apple stock can climb as high as $272.
Continue Reading Below
Here's a look at why these analysts are so optimistic.
Betting on a strong iPhone business
RBC Capital Markets analyst Amit Daryanani, who upgraded his price target from $240 to $250 this week, believes the company's thriving iPhone business is poised to be a catalyst for the stock.
"We think demand for this generation iPhones -- XS Max/XS/XR -- is robust and average selling prices and gross margins could improve given mix benefits," Daryanani said in a note to clients (via CNBC). The analyst also noted the pricey XS Max was the popular iPhone, with an RBC survey indicating 25% of buyers preferring the device.
Daryanani isn't alone in thinking that Apple's priciest iPhone is seeing impressive demand from consumers. KGI Securities analyst Ming-Chi Kuo also recently noted that iPhone XS demand is "better than expected."
Apple has underappreciated opportunities
An even more bullish analyst is Samik Chatterjee from J.P. Morgan. Chatterjee, who is replacing another analyst at JPMorgan, has a 12-month price target of $272. This is up from Chatterjee's previous price target for Apple stock -- $240 -- from when he was at Goldman Sachs.
Chatterjee's optimistic view for Apple stock is sourced from several areas. While the analyst is similarly optimistic on Apple's iPhone business, expecting more appreciation in the device's average selling price, Chatterjee also cites the company's strong momentum in services, a positive impact of Apple's expected share repurchases, and optionality created by Apple's strong balance sheet as some notable catalysts to his bull case.
Both analysts have some good points, particularly when it comes to momentum in iPhone and services.
While it's easy to think of Apple's iPhone business as a mature segment that has little upside left, the segment's recent performance suggests otherwise. Consider that in Apple's most recent quarter, the iPhone's average selling price skyrocketed from $606 in the year-ago quarter to $724, helping iPhone revenue rise 20% year over year during the quarter. Considering Apple's clear momentum with customers as they snapped up pricier iPhones over the past 12 months, it's no surprise Apple's iPhone XS Max seems to be resonating with the public.
Then there's Apple's services business, which has swelled to become the tech giant's second-largest segment. Services revenue was up 31% year over year in the company's most recent quarter -- and there's no sign of a slowdown. Some key catalysts for the segment include double-digit year-over-year growth in Apple's overall installed base of active users and 60% year-over-year growth in paid App Store subscriptions in Q3.
While investors should take analysts' price targets with a grain of salt, both of these analysts highlight some notable fundamental catalysts for Apple.
10 stocks we like better than AppleWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Apple wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 6, 2018
Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.