Just a few weeks ago, Wedbush analyst Daniel Ives suggested that Apple (NASDAQ:AAPL) could soon be worth nearly $1.6 trillion, based on a $350 price target and the company's 4.4 billion shares outstanding. A few days ago, D.A. Davidson became the biggest Apple bull on Wall Street with a $375 price target. Not one to be outdone, Ives has now pegged a whopping $400 target on Apple shares under the most bullish scenario. That would put the tech titan's market cap at around $1.8 trillion, with the $2 trillion threshold within reach.

Here's how Apple gets there.

Exterior of Apple Store on Fifth Avenue

Image source: Apple.

$2 trillion by the end of 2021

Following channel checks for the iPhone 11, Ives reiterated his outperform rating. The analyst believes that demand remains strong, and AirPods popularity continues to be "jaw dropping." Analysts are somewhat mixed on the potential of 5G iPhones, with some arguing that the device will underwhelm, while others see a massive supercycle on the horizon. Ives falls into the latter category.

5G may create a multiyear upgrade cycle as customers transition to the latest technology, and those blazing fast cellular data speeds may also help bolster the services business. In a research note to investors, Ives wrote:

Many investors are asking us: Is all the good news baked into shares after an historic upward move over the last year and into early this year? The answer from our vantage point is a resounding NO, as we view only the first part of this massive upgrade opportunity leading to a transformational 5G "super cycle" with 200 million to 220 million iPhone units now the new line in sand for demand based on our recent Asia supply chain checks.

Coupling this dynamic with a metamorphosis-like valuation re-rating by the Street around the company's $50 billion+ annual services revenue stream is the 1-2 punch to how we ultimately see a stock in the bull case $400 valuation by year-end.

That could allow Apple's market cap to reach $2 trillion by the end of 2021, according to Ives.

Multiple expansion is a powerful force

It's worth acknowledging that analysts in recent weeks have been chasing Apple shares higher with upward revisions of price targets. That's not an uncommon occurrence when a stock rallies significantly, as Wall Street tries to accommodate market activity, but the phenomenon also reinforces that momentum. Besides, increasing price targets after the fact does little good for investors.

Perhaps more meaningful in terms of fundamentals, the "valuation re-rating" that Ives refers to is a key inflection point in investor sentiment. Apple has been trading at a discount to the S&P 500 for the majority of the past decade. Other than a few blips, the last time that Apple's P/E ratio was consistently higher than the S&P 500's was back in 2012, according to data compiled by Bloomberg.

That changed recently, and Apple is finally being valued at a premium to the broader market as investors appreciate the tech juggernaut's efforts to diversify away from the iPhone while building a profitable services segment. The resulting multiple expansion has created a new realm of possibilities for Apple's valuation.