Citi: 5 Reasons Apple Can Trade Higher

Citi issued a company update on Tuesday highlighting Apple Inc. (NASDAQ: AAPL) a day after it posted earnings results that beat consensus sales and EPS expectations, driven primarily by stronger than expected iPhone units. Citi rates Apple as a Buy with a $145 price target.

Analysts Jim Suva and Asiya Merchant gave five reasons why they believe that Apple's stock may continue its unprecedented rise:

1. Device Acceleration: Wireless cell phone companies have new policies that allow consumers to upgrade their phone before their two-year contract expires. This makes it easier for consumers to upgrade its iPhone to the newest iPhone rather than waiting two or more years for an upgrade.
2. Attractive Valuation: Apple beat consensus revenue estimates by 4 percent and consensus EPS estimates by 8 percent, despite foreign currency headwinds. Due to these results Citi believes that Apple is not overpriced.
3. Gross Margins: Due to the increased usage of mobile applications, Citi believes that consumers will shift iPhone purchases to the higher memory models. These phones provide a higher margin for Apple.
4. Apple Pay and Passbook: The combination of these two platforms provide numerous uses including, Mobile Wallet, Automobile Key-less Entry, and Personal Home Entry programs. This provides further growth opportunities for Apple.
5. Enterprise Opportunity and Apple Watch: Citi believes that Apple will partner with other companies such as International Business Machine Corp. (NYSE: IBM) to build mobile enterprise applications that will drive future hardware sales and increase consumer stickiness. Furthermore, analysts believe that Apple will make the necessary improvements to the Apple Watch, most notably improving the battery life, that will further drive sales and company profits.