Wedbush's Bull Case for Apple Ahead of Earnings

Apple Inc. (NASDAQ: AAPL) has a been a driving force in pushing the markets to new all-time highs, and with earnings on the way later this month, analysts are starting to make calls on where the stock can go from here.

Wedbush reiterated an Outperform rating and its $350 price target, implying an upside of 17% from the most recent closing price of $298.39. The bull case valuation scenario has a valuation of $400 for the stock. For this call, the boutique brokerage firm took into account a recent release from Apple in regards to its performance over the holiday season.

In the release, Apple highlighted its services strength on the flagship App Store, with customers spending $1.42 billion during holiday season, and thus it grew an impressive 16% year over year.

Coupling this dynamic with AirPods, which Wedbush now believes finished the year selling 67 million units (which was well above its original 56 million estimate), speaks to the underlying strength that Apple is having monetizing its golden jewel installed base of 925 million iPhones worldwide heading into fiscal 2020 and beyond.

Wedbush believes the services business and this linchpin annual revenue stream, which is poised to hit $60 billion by fiscal 2021, is worth between $500 billion to $650 billion and is a core part of the rerating that is happening on shares of Apple over the past year. In the call, the brokerage firm further detailed:

We believe mid teen growth on the services business remains front and center as the core fuel in the engine for Apple as the company has the 1-2 punch of a 5G super cycle and a services business which is now starting to be properly valued by the Street in our opinion. We continue to believe an upside on iPhone units, services, and AirPods will result in a strong December quarter for Cook & Co, on January 28th after the bell with clear momentum heading into a massive 5G super cycle with currently 350 million iPhone customers in the window of an upgrade opportunity.

Shares of Apple were last seen up less than 1% at $300.16, in a 52-week range of $149.22 to $300.60. The consensus price target is $273.63.

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