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Apple Inc. (AAPL) shares jumped higher Thursday after JPMorgan Chase initiated coverage on the world's biggest tech company with an overweight rating and a price target of $272 a share.

JPMorgan analyst Samik Chatterjee said the compelling transformation of Apple's services business, as well as its capital deployment and  an "underappreciated" installed base, will drive group sales and earnings in the quarters ahead. JPMorgan said it sees the mix of services revenues rising from 8% in 2012 to as high as 20% by the end of the 2021 fiscal year. JPMorgan's price target implies a 23% upside for the stock going forward, given its ability to generate sales and return cash to shareholders.

"While Apple's leadership position in the premium smartphone market is well understood by investors, we still see considerable upside to the stock from current levels," Chatterjee wrote.

The note helped send Apple, which Jim Cramer's Action Alerts Plus charitable trust owns, some 2% higherto $225.27 shortly before noon ET. That move extends the stock's year-to-date advance past 33.3%.

JPMorgan said Apple has a target to be "net cash neutral" over the longer term, allowing it to deploy as much as 30% of its $1 trillion market capitalization through dividends, share buybacks and mergers, a combination that "provides enormous option value to investors/potential upside to earnings." The bank also cited "stronger-than-expected" price increases for the core iPhone business" and "continuous innovation disrupting new end-markets." 

Apple CEO Tim Cook said last month that the company's third quarter earnings were driven by "continued strong sales of iPhone, Services and Wearables, and we are very excited about the products and services in our pipeline." Services revenues, the company said, grew 31% from the same period last year to a record $9.548 billion, a figure that represents around 18.3% of the group's $52.2 billion in total sales.

Apple's recent product launch, which unveiled a suite of three new iPhones, was also notable for the upgrade of its AppleWatch, a product that is growing in both popularity among the company's customer base and importance to its bottom line. The $399 Series 4 AppleWatch, for example, was built with a ECG app that tracks its user heart movements and could allow it to tap into a new, multi-billion dollar healthcare revenue stream. 

"Our strong business performance drove revenue growth in each of our geographic segments, net income of $11.5 billion, and operating cash flow of $14.5 billion," said CFO Luca Maestri. "We returned almost $25 billion to investors through our capital return program during the quarter, including $20 billion in share repurchases."

Still, TheStreet's Stephen "Sarge" Guilfoyle says that while he wants Apple in his portfolio, savvy investors will skip Thursday's rally and wait for the stock the pull back to $220. "My plan is to buy Apple at $220 or better within two weeks," he writes. Read his full analysis here.

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(This article has been updated with midday stock prices and additional details.)