Barclays Capital analyst Ben Reitzes said he believes that though Apple's upside over the next several months is largely due to the iPhone, which has been selling like gangbusters since it was first announced in September, there are more levers the company can pull, including working on the cost structure and boosting gross margins.
"[W]e believe consensus estimates for gross margins could be conservative for a few years given historic mix shifts within iPhone & iPad toward bigger screens, along with the introduction of the new high-margin Apple Watch & innovative services," Reitzes wrote in a note.
Reitzes raised his price target on Apple to $140, but kept his "overweight" rating on the company, which recently hit $700 billion in market capitalization.
Shares of Apple have gained 43.9% year to date, vastly outpacing the 14.9% gain in the Nasdaq.
Apple announced it sold more than 10 million iPhones in the first weekend they were available, and the company is selling everything it can make, particularly the 5.5-inch iPhone 6 Plus, which starts at $299 and should continue to add to Apple's historically high gross margins. Apple said it would have sold more iPhone 6 Plus units but the phone is "supply constrained," according to comments from Apple Chief Financial Officer Luca Maestri made during Apple's latest earnings call. Some analysts on Wall Street are calling for Apple to sell as many as 70 million iPhones in the quarter, which would be a record for any quarter, much less the all-important holiday quarter.