FORTUNE — When Apple
broke through $625 Tuesday to hit a 600-day high, Bernstein’s Toni Sacconaghi was one of 19 Apple analysts whose price targets were underwater. He took care of that Wednesday morning with a note to clients that raised his 12-month target to $700 from $615. After June 9, when Apple splits 7 for 1, Sacconaghi’s new target will be a nice round $100 a share.
Why the change? He offers five reasons:
1. Apple’s shares generally outperform the market ahead of a new product launch — by 11% on average — and he’s expecting two significant new product offerings this year: A big iPhone and the so-called iWatch.
2. Growth investors are light the stock and can’t get much lighter. “For benchmark sensitive managers,” he writes, “we believe an active bet against Apple may be difficult to sustain.”
3. The forthcoming stock split (on June 9 to holders of record as of June 2) could broaden retail interest and make it easier for stock price to climb (e.g., $90 to $100, vs. $625 to $700).
4. Apple is unlikely to let itself miss estimates in a new CFOs first quarter, and it has considerable power to make sure it doesn’t (through stock buybacks, for example).
5. The stock is still cheap compared with other “more stable” securities. Even at $700 a share Apple would be trading at a 20% discount to Microsoft
Sacconaghi is bullish about Apple’s prospects for the next three to six months. Beyond that? Not so much.
“Longer-term,” he writes, “it is unclear to us that Apple can sustainably increase its earnings over the next 3 to 5 years. We believe Apple’s primary end markets (smartphones and tablets) are increasingly mature and that overall gross margins are more likely to decline than improve over time. Additionally, while Apple is an innovative company, we note that the law of large numbers dictates that new product categories will have an increasingly difficult time moving the needle financially for the company.”
See also: Apple’s pre-split share price jumps ahead of the Street