Apple expected to hit $1-trillion market cap in a year

Apple will emerge the world's most valuable company with a market cap of $1 trillion in a year, says an investment banker.

Dan Ives, managing director of investment bank FBR Capital Markets, initiated coverage of Apple with an "outperform" rating on Thursday, but it was his high target price that made the call stand out.

With a 12-month price target of $185, Ives' call also reflected a market cap of over $1 trillion for the world's most valuable company.

According to Ives, a combination of factors, that had not been fully appreciated by the market would push Apple to the $1 trillion mark.

On CNBC's "Fast Money" on Thursday, Ives identified Apple's software business, which included features like Apple Pay, apps and streaming TV services, as the prime factor in his analysis.

"I think really the golden jewel is on the software side," he said. "We believe that could add up to $2 in earnings by 2017. I believe this is really sort of the fuel in the engine for Apple."

He added, the higher-margin software business would increasingly contribute a larger piece of Apple's revenue. "The software services piece is 12 percent of gross (profit), based on our estimates. We believe that triples over the next two years."

Pointing to wearables as another growth area for the company he said, "We view it as a $20 billion market." It's only an appetizer at the restaurant in terms of Apple Watch what we expect to see from them over the next one to two years."

About Ives' accuracy rating, Smarter Analyst, reported, "According to TipRanks.com, which measures analysts' and bloggers' success rate based on how their calls perform, analyst Daniel Ives has a total average return of 9.1% and a 60.0% success rate. Ives has a 1.3% average return when recommending AAPL, and is ranked #548 out of 3573 analysts."

Ives' price target of $185, represented a potential upside of 47 per cent from where the stock was currently trading.

Ives wrote, ''While Apple remains a widely covered company from a sell-side perspective, we are throwing our hat in the ring with the unique approach of focusing more on Apple's software, which represents the ''crown jewel'' embedded in its products/ services and should ultimately help lead it to becoming the world's first $1 trillion company as mobile device hardware becomes increasingly commoditized.''

He continued, ''With the Apple Watch launch front and center this week (pre-sales) as it potentially opens up another growth avenue, we ultimately believe that, at its core, Apple attracts its customers by leveraging the benefits of its closed software ecosystem, driving greater adoption of its devices and services, a positive dynamic and a major ingredient in Apple's recipe for success. We believe the Street is currently underestimating the top-line/profit growth potential in these key areas with Apple's all-important software platform at the epicenter of its solutions.''