Continued iPhone growth could push Apple stock to $400

Huberty's latest note to investors notes a survey that found 58 percent of iPhone customers plan to upgrade their iPhone in the next year, up significantly from the 18 percent who said the same in 2008. That's a difference of 18 million new sales in calendar year 2011.

Huberty continues to believe that a price cut for the iPhone would produce great benefits for Apple. She sees U.S. demand alone increasing by 40 percent with either a $50 price drop for the handset, or a $20 cut in service plan costs.

Morgan Stanley's "base case" for Apple stock, which projects it to rise to $310, includes only a price cut for the iPhone hardware. But the bull case, where AAPL skyrockets to $400, assumes a more aggressive price reduction in both hardware and service on Apple's part.

In addition, Huberty believes that the addition of Verizon as a carrier in the U.S. could offer Apple another 7 million unit sales. She believes that 17 percent of Verizon customers would upgrade to the iPhone if the option were available. Huberty's base case assumes the iPhone won't debut on the Verizon network until the second half of 2011, while the bull case includes a debut in the first half of 2011.

Broader distribution is another key to iPhone expansion, with Apple making inroads in the enterprise market and expanding to new countries and carriers across the world.

Apple was also added to Morgan Stanley's "Best Idea" list, highlighting it as one of the best options on Wall Street. The Apple upgrade is quite a change for Huberty from just a few years ago, when she was notoriously negative on AAPL stock, suggesting the iPhone was too expensive even at a $199 price point. In late 2008, she predicted that iPhone sales would suffer because Apple had priced the product too high.

But in 2009, the analyst turned positive on Apple, stating that the company had become the "clear leader in the battle over the mobile Internet."