Here’s Why Apple’s Stock Hit An All-Time High Today

What a difference a few months make. After hitting a low point in May of last year, Apple’s stock has rallied back 47%, and it just hit an all-time high today. Shares catapulted past $134.54 a few hours ago, beating a previous high in April 2015.

So what’s going on? Part of the answer lies in the fact that Apple has been buying back stock—6% of the total since September 2015, as CNBC’s Eric Chemi pointed out. So there are simply fewer (read: more sought-after) shares on the market today.

But there’s more to it than that. The real answers likely have more to do with Apple’s future than its past. If anything, the company’s fundamentals have gotten worse since 2015, and yet it’s not hard to find analysts saying that Apple stock is still a good buy. Some expect the price to keep moving up this year, perhaps into the $160 range.

Tim Cook and company have been saying that Apple has “exciting products” in the pipeline, but today’s confidence in Apple probably has little to do with such vague assurances. Rather, investors are feeling good about Apple’s bread and butter—the iPhone—and possibly its growing “services” business, which includes Apple Music, cloud services, and the App Store.

Investors want to believe that Apple can inject a big shot of innovation and inspiration into the forthcoming iPhone 8. As news of the device has begun to trickle out, the belief has grown that Apple will deliver. This year is the 10th anniversary of the iPhone, and Apple is expected to reimagine the device in a big way.

Meanwhile, Apple’s services business is gaining steam. Apple has a billion iOS devices in the wild, and each of them is a vending machine for Apple services, like music, video, apps, and cloud service. The services business brought in $7.2 billion in revenue in last year’s December-ending quarter. That represents a growth of 18% from the same quarter the year before.

Cook said the services business contributed $20 billion in revenues in 2016, and Apple is trying to double its services business in the next four years. It’s worth noting that in order to reach $48 billion in services revenues, some believe Apple will have to make an acquisition, possibly of a content company. Disney has been floated as a possibility, but so far Apple hasn’t tipped its hand.

Returning To Form

Back in 2014, the iPhone 6 was a huge hit for Apple because of its new larger screen sizes and new design. That device ushered in a new era in Apple’s history. Phone sales surged, and so did Apple’s market cap. The iPhone still contributes roughly two-thirds of Apple’s revenues.

But after the iPhone 6, investors saw a series of new phones that were variations on the same theme. The iPhone 6s and 6s Plus, and the iPhone 7 and iPhone 7s Plus, upgraded the iPhone 6’s core components, but they also came in the same sizes, and used the same design and materials. In general, iPhone sales have tapered off since the iPhone 6. (There was a $400 iPhone 5 revival in there somewhere, too.)

Investors are clearly hopeful that the iPhone 8 will reverse this trend, but of course the vibrancy of Apple’s iPhone business is closely connected to the success of its services business. In order for Apple to sell more services, the number of iOS users must keep growing. And that depends on Apple continuing to wow tech buyers with inspiring devices—mainly iPhones.

The Street is feeling good about this one-two punch of devices and services right now. The storyline will continue until the release of the 10th anniversary phone this September. Barring any unforeseen disasters (like a 35% tariff levied on iPhones built in China), it’s easy to imagine Apple’s stock continuing to gain steam at least until then.