Apple (AAPL -0.12%) stock has skyrocketed over the past year, rising more than 90%. But several analysts are betting shares can go higher. Indeed, two analysts recently slapped $450 12-month price targets on Apple stock, implying 15% upside from where shares are trading at the time of this writing.

Here's a closer look at what's behind two analysts' recent buy ratings and increased price targets for Apple shares.

A bar chart highlighting a growth trend.

Image source: Getty Images.

The path to $450

Needham analyst Laura Martin boosted her price target for Apple stock from $350 to $450 on Wednesday. The main catalysts that can get shares there? The tech company's fast-growing services and wearables businesses, she says. As these businesses continue to grow, they will make the company's overall ecosystem of hardware, software, and services stickier, reducing customer churn.

Highlighting how strong these two businesses are performing, Apple's services and wearables, home, and accessories segments saw revenue rise 16% and 41% year over year, respectively, in fiscal 2019. Notably, since Apple's wearables business is included in a segment with other products that are growing at a slower rate than sales of Apple Watch and AirPods, the segment's overall growth rate understates the growth rate of Apple's wearables business.

Of course, growth in Apple's wearables business slowed during the second fiscal quarter amid supply challenges, store closures, and reduced consumer spending. But Apple's wearables, home, and accessories segment still managed to grow 23% year over year during the period.

Services revenue has remained resilient, of course, since App Store sales and subscriptions likely benefit from consumers sheltering at home. Total services revenue increased 17% year over year during fiscal Q2 -- and the segment will likely continue growing at strong rates throughout fiscal 2020.

Martin's bullish take on Apple follows Wedbush analyst Daniel Ives' decision earlier this week to increase his price target on the stock from $425 to $450, citing a similar bullish view for services as well as a likely tailwind from the rumored launch of 5G iPhones this fall.

Why Apple stock is growing on investors

While both of these analysts have some concrete reasons for their optimism, investors mostly seem more willing to pay a high price tag for the tech giant's shares because the quality of its revenue is improving.

Apple's high-margin services business is growing as a percentage of the company's total revenue. Today, services represent 19% of trailing-12-month revenue, up from 16% one year ago and 14% two years ago. With no sign of a slowdown in this important segment, investors are betting Apple's growing services business can strengthen the company's overall ecosystem and increase customer lock-in. Further, since revenue from services has twice the profit margin of Apple's hardware sales and is more predictable than revenue from product launches, the company is looking more attractive now than it was when it was more dependent on its annual iPhone launches.

Martin and Ives' moves to update their price targets based partly on momentum in services and the quality of Apple's ecosystem are sensible. Apple is morphing into a high-margin, recurring-revenue machine with a growing moat to keep competitors at bay and customers in the ecosystem.