How Apple Reaches $1 Trillion From Over $700 Billion Today? UBS Analyst Provides Perspective

Although with a over $700 billion market cap Apple Inc. AAPL is the world's largest company, but it's still pretty far from the $1 trillion magic figure right now. Steven Milunovich, UBS analyst, was on CNBC Tuesday to discuss how Apple will be able to reach there.

The Way To $1 Trillion

"Our price target is $150," Milunovich began. "That doesn't quite get you to your trillion dollars from $700 billion today. But Apple selling at a 20 percent discount to the market multiple. So, we think, there is both still room for some earnings upside surprise. Now it's true that the next product cycle on the phone is not going to be as big as the 6. But we still think with 20 percent of users having upgraded there is room to go there. China in particular we still think has upside. So, some earnings upside and then some multiple expansion.

Essentially A Phone Company

Milunovich was asked if Apple needs to expand and diversify into other areas successfully going forward as opposed to just being a phone company. He replied, "Over 2/3rds of the profit comes from the phone. It's essentially a phone company today. But it is building an ecosystem. So, first of all the phone is becoming more of an annuity than its been historically."

"In terms of new product, the watch actually it's financially important in the next year because, we think, the phone is relatively flat. So, going from 0 to say $12 billion on the Watch is still a pretty good increment. But, I think, it's going to take a couple of more version for this to become a must have item. In the meantime we will probably see something on the TV side with Over-the-Top," Milunovich concluded.