Apple Inc. (NASDAQ:AAPL)’s iPhone line, which contributes 50% of total revenue and 65% of gross profit, is a major “upside driver” for the company after the launch of the iPhone 5S and iOS 7, says a report from Morgan Stanly by analysts Katy L. Huberty, Jerry Liu and Scott Schmitz. Analysts feel that other recently launched items like the iPad Air, iPad Mini with Retina, MacBook and MacBook Pro will “help stabilize the remainder of the business.”

Apple

New products from Apple

Apple Inc. (NASDAQ:AAPL) has launched refurbished iPads along with many price options, which will also add to the revenue growth of the company from the fourth quarter of 2013. Apple stated that it hit the 170 million iPad mark this month, which was in line with analysts’ expectations of pocketing around 168 million cumulative shipments by the end of September. Growth picked up in the third quarter and is expected to continue in the last quarter, as well.

The report noted that their estimate of -4% year-on-year iPad unit decline in the fourth quarter is conservative, as iPad Air and iPad Mini are scheduled for shipping in 42 countries including China compared to 34 countries in the previous year.

Rate of decline in Macs and PC demand could slow for a time wth the launch of new Macs, but that will not continue for long, believe analysts. In 2014, Mac units are expected to be down 5%, slightly more than the global PC decline of 4% year-on-year.

Potential catalysts

Apple Inc. (NASDAQ:AAPL) shares may witness continued uptrend due to several catalysts. A few drivers that analysts expect will add to growth are rising consensus estimates on the back of iPhone ASP / margin upside, cheaper iPhones like 5C, and discounts that Apple Inc. (NASDAQ:AAPL)offered earlier in 2013. These factors are expected to contribute to Apple Inc. (NASDAQ:AAPL)’s earnings, and the larger display size phone will enhance Apple Inc. (NASDAQ:AAPL)’s market share. New services based on the fingerprint sensor, iCloud Keychain and iBeacon make the ecosystem even slicker and differentiated. Additional supply chain data points to upcoming product innovation, like iWatch and iTV, which will also act as a catalyst.

Potential threats

Risks that analysts cited to this valuation are competition from Android and Windows in the smartphone and tablet market, increased duration of replacement cycles by the network carriers and cutting on subsidies due to smartphone market saturation.

Morgan Stanley analysts have an Overweight rating on Apple Inc. (NASDAQ:AAPL) with a price target of $540.