Apple Inc. (NASDAQ:AAPL) has been given a Buy rating and a price target of $650 by Deutsche Bank analyst Sherri Scribner. The price target given by the analyst represents a 23% upside to Wednesday’s closing price of $530.32.

Apple

iPhones, iPads seen as major growth catalyst

Apple’s leading position in the smartphones and tablets market, and the rising expectations of a bigger iPhone, has been cited as the primary reason for the favorable rating. According to the analyst, Apple Inc. (NASDAQ:AAPL) products are considered the gold standard in both smartphones and tablets segments, and new products would act as long-term growth drivers for the company.

In 2013, iPhones and iPad accounted for 72% of Apple’s sales. In both the smartphone and tablet segments, the growth rate is expected to slow down, but overall growth of the industry is strong, believes the analyst. In the future, the smartphone segment is expected to grow in the high teens while tablets are expected to grow in the mid-20s. Over the next year, analysts expect iPhones and iPads to be a major growth catalyst for Apple Inc. (NASDAQ:AAPL), and “further upside in iPhones coming from a larger screen sized phone and further penetration in emerging markets, said Scribner.”

Apple Inc.’s valuation more in line with market

Scribner notes that apart from bringing a potential smartwatch and TV set, Apple Inc. (NASDAQ:AAPL) could also foray into the connected home segment (similar to the offering from Google’s Nest). Apple has been known for giving “surprise and delight” to its customers, therefore, if the iPhone maker comes up with any new and successful product it would provide further upside to the “company’s already above-market growth rates,” believes the analyst.

The price target of $650 from Deutsche Bank is based on a multiple of 14 times the expected EPS of $46.50 for FY 2015. It must be noted that previously Apple’s valuation has been around 24 times earnings, but slower growth has forced the valuation to be more in-line with the market.

At 10:40 a.m. EDT, Apple Inc. (NASDAQ:AAPL) shares were up 0.25% to $531.75. Year to date, shares of the Cupertino-based firm are down around 7.3% owing to the rising expectations of new categories of products, which could help the iPhone maker to break away from the stagnation in the global smartphone market.