This year has been tremendously kind to Apple Inc. (AAPL) stock as it sets new records almost on a weekly basis of late. Tuesday’s record high was at $143.22 as the shares rose by nearly 2% following another bullish report. One analyst sees a clear path to at least $175 per share for Apple Inc. (AAPL) stock over the next few years. By early afternoon, the stock was on track for its fifth record close this month.

iphone 8 apple stock AAPL
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Is it too late to buy Apple stock?

UBS analyst Steven Milunovich reiterated his Buy rating and $151 price target for the stock in a research note dated $151 as he proclaimed $200 as a possible two- to three-year target. However, he feels that $175 is the more likely target in this time frame.

He noted that Apple Inc. (AAPL) stock has risen 15% since the company’s last earnings report, so investors have been wondering whether the upside has dried up yet. He reassures them that there is probably still upside for those willing to buy and hold for at least the next two to three years. However, he adds that in an ultra-bearish scenario involving “iPhone maturation, lack of new products, and margin pressure,” there could be downside to $125 if the stock’s PE multiple falls to 12 times.

Three phases for Apple stock

Milunovich broke down what he sees as the three main phases for Apple Inc. (AAPL), which are Supercycle (a.k.a., the iPhone 8), Sustainable Growth and Innovation. He subscribes to the Supercycle thesis which is prevalent on Wall Street right now, although a few have started to warn investors to tread carefully.

According to Milunovich, the Supercycle phase will last through fiscal 2019, and then in the nine months after that, the company will move into the Sustainable Growth phase, in which the focus will move from the iPhone 8 to whether the company can keep and monetize its installed base and “deliver annuity-like growth.” He feels the Innovation phase could arrive in fiscal 2019 as investors try to figure out if the company will win the next stage of technology.

What it would take for Apple stock to reach $200

The analyst feels that the most likely scenario is for Apple Inc. (AAPL) stock to maintain a multiple of 14 times, rising as earnings rise although at a decelerating rate. Then when the iPhone stops growing, he predicts “moderate” success for new products and “flattish” margins. He explained that in order for Apple Inc. (AAPL) stock to reach $200, the iPhone must keep growing past fiscal 2018 and new product categories must be added. He also believes that share repurchases must exceed $500 billion annually, thus raising the P/E multiple to 17 times.

On the other hand, if the iPhone turns negative and it becomes hard for the company to offer any “material” innovation, he sees possible downside to $125. This will be an important year, as if the company disappoints with the iPhone 8, investors will probably punish its stock severely.