Apple Inc shares opened about 5 percent higher on Wednesday after the technology company's third-quarter profit beat analysts' expectations due to stellar sales of its iPhones.
The world's largest technology company said it sold 31.2 million iPhones in the quarter, far more than the expected 26 million, easing concerns that growing competition is hurting demand for its smartphones.
Higher sales of older phone models drove sales numbers in the quarter as Apple aggressively cut prices for the older iPhone 4 in emerging markets before phasing it out, Susquehanna Financial Group analyst Chris Caso wrote in a note.
Many analysts have not updated their outlook on Apple stock, preferring to wait for the expected launch of iPhone 5S and a low-end iPhone later this year before updating their views.
BMO Capital Markets raised its rating on the stock to "outperform" from "market perform" citing Apple's fourth-quarter gross margin forecast of 36-37 percent at a time when new products are expected.
"We believe that the September-quarter gross margin guidance plausibly supports our view that the new mid-range iPhone will be in the ~$450 price range with approximately 38% to 40% gross margins," BMO analysts said.
However, Stifel Nicolaus analyst Aaron Rakers cut his price target on Apple stock by $60 to $540, saying weak China results and iPad shipments were negatives for the company.
A sharp drop in Apple's China revenue in the second quarter underscores the challenges it faces as cheaper local rivals close the technology gap, threatening demand in the company's second-largest market.
Along with a lower-priced iPhone some analysts want to see a new line of product from the company to complement its phones and tablets.
After smartphones, a watch-like wrist gadget is considered a potential new battleground between Apple and rival Samsung Electronics Co.
"Although (the) iPhone refresh will help the sentiment on the stock, we believe the company needs to launch a new product category to drive estimates materially higher," Mizuho analyst Abhey Lamba said in a note.
Apple has applied for a trademark for "iWatch" in Japan.
Apple shares, which have lost about 18 percent in market value in the last six months, closed at $418.99 on the Nasdaq on Tuesday.
(Reporting by Supantha Mukherjee and Chandni Doulatramani in Bangalore)