Apple Inc. (NSDQ:AAPL) stock is up by 30% since its May lows. However, this hasn't been a dampener on how Wall Street views the stock. Analysts on Wall Street continue to be optimistic on Apple stock, as highlighted in our recent Apple post. The flurry of upgrades and bullish notes continued on Wall street as analysts from Stifel and Deutsche bank upped their iPhone estimates going into Apple Q3 earnings. Separately, noted Apple analyst Ming Chi Kuo raised iPhone 7 sales expectations citing Samsung's Note 7 fiasco. Should investors buy into the growing optimism around Apple stock, especially given the huge rally the stock has undergone in the recent months?

Rising iPhone 7 Sales Estimates

Stifel analyst Aaron Rakers raised his price target on Apple stock to $130, up from $120 while also raising the revenue/EPS estimates and iPhone sales expectations for the next two quarters. As reported by Barron's, the analyst stated:

We are increasing our F4Q16 revenue and EPS estimates from $45.6B/$1.57 to $47.7B/$1.69 (street: $46.9B/$1.66), which now reflects iPhone shipments of 47.0 million vs. our prior 42.2 million estimate (street: 44.6M; 40.0-46.2M range) […] We adjust our F1Q17 (Dec ’16) estimates from $70.5B/$3.01 to $74.3B/$3.17 (street: $74.4B/$3.19) with iPhone shipments now estimated at 76.6M vs. our previously noted conservative estimate of 69.9 million (street: 75.4B).

The new estimates imply incremental iPhone sales of 4.6M in the September quarter and 6.7M in the December quarter. At an ASP (Average Selling Price) of $655 (consensus price estimate), the incremental sales could translate into additional revenue of $3.01B in the September quarter and $4.39B in the December quarter. The iPhone segment could net Apple over $30B revenue in the September quarter based on unit sales of 47M and an ASP of $655. However, the actual incremental revenue could be higher as recent reports indicate a higher proportion of iPhone 7 plus sales, which should drive the ASP higher.

Aaron Rakers wasn't the only analyst upgrading iPhone sales expectations. Giving him company was Sherri Scribner from Deutsche bank, who maintained her hold rating but raised her price target to $108, from $105 earlier. The Deutsche analyst also upped her iPhone expectations to 46M for the September (Q4 2016) quarter and 75M for the December quarter (Q1 2017). The bullish commentary was also supported by KGI's noteworthy Apple analyst, Ming Chi Kuo, who stated that the Note 7 Fiasco could net Apple 5-7M in incremental iPhone 7 sales. So what do these upgrades mean for Apple financials? Can they move the needle to justify higher valuations for Apple stock?

Putting This Into Perspective

The iPhone revenue segment has contributed over 60% of Apple's total revenue over the last 4 quarters. While the segment contribution to total revenue has dipped marginally, on a YoY basis, in FY 2016, it is still a large chunk of Apple's total revenue.

Assuming that the segment, with $30.79B (47M units * $655 ASP) in segment revenue will contribute around 62.5% (in line with Q4 2015) of total revenue in the September quarter (Q4 2016) implies that the total revenue figure for Q4 2016 could come in at $47.36. The wall street consensus currently anticipates Q4 2016 revenue of $46.55B, which means that the strong iPhone sales could be setting Apple up for a huge beat in its upcoming earnings report, which could drive Apple stock price higher.

Conclusion

The flood of bullish commentary on Apple stock continues on Wall Street with Stifel and Deutsche bank analysts being the latest to up their iPhone expectations and Apple price targets. Given the historically high contribution of the iPhone segment to Apple's revenues and profits, a strong performance in the segment could lift Apple's overall performance. Based on the latest bullish commentary, Apple could be setting up for a big beat in its upcoming earnings report on October 25. Hence, investors looking for short-term upside should buy into Apple stock ahead of the upcoming earnings report in order to benefit from a post-earnings rally in the Apple stock price.