Apple’s stocks on the market are expected to rise by a surprising 40%. The claim came from Goldman Sachs, the investment bank, that added the tech firm to its “conviction buy list” with a price target of $163 per share.

Of course, everyone makes mistakes and so do Wall Street analysts. With a plethora of variables that need to be taken under consideration, mistakes are part of the routine. Yet, the analysts at Goldman Sachs seem to have a strong case.

In a nutshell, Goldman Sachs believes that Apple is undervalued due to the fact that people who choose to invest on it, address the company as a hardware manufacturer and as such, they expect it to follow the unstable and cyclical revenues that similar companies follow – hence the typically trade at low valuation levels.

In fact, analyst Simona Jankowski points out in a report that Apple trades at a price to earnings ratio that is 30% below the average valuation for companies in the S&P 500 index. Apple carries a P/E around 13 versus approximately 19 for the average company in the index.

However, Goldman Sachs seems to estimate that the American tech giant is evolving into a services business, which could result in additional growth venues for the company.

The report of the bank reads:

“We expect that over the next year, the focus will shift from unit growth (which is slowing given a maturing smartphone market) to installed base monetization and recurring revenues (“Apple-as-a-Service”). Apple’s model has already tilted that way with its new iPhone 6s installment plans, and we see the upcoming TV service as a powerful next step.”

Now, whether Apple’s stock will truly rise by 40% is yet to be seen. Let’s keep in mind that such a turn-out does not depend solely on the companies infrastructure but on investor sentiment and overall market conditions as well.