One of Apple's biggest dilemmas is that iPhone sales, the company's bread and butter, are shrinking as the replacement cycle becomes lengthier.
But Toni Sacconaghi, a top Apple analyst on Wall Street, told CNBC on Wednesday that his firm would upgrade the stock if the company could create a subscription plan for its consumer products like the iPhone.
"If Apple was able to turn the iPhone business into a subscription business ... [and] somehow convert more consumers to buying something that's transactional today into a subscription model, we think that would make a world of difference and that would be something we'd view very positively," the Bernstein senior technology research analyst said on "Fast Money Halftime Report"
The iPhone replacement cycle is one of Apple's "core issues," Sacconaghi said. As the smartphone market reaches a mature point, iPhone sales have begun to drop as customers are more likely to hang on longer to their devices before deciding to upgrade to new models. Sales of the device were down 15 percent year over year in the company's fiscal first quarter.
Apple is working to convince traders to worry less about iPhone sales and more about the services it offers. Yet, the iPhone still makes up more than 60 percent of revenue compared with the growing services businesses that accounts for about 13 percent of revenue.
"It's not big enough," BMO Capital Markets analyst Tim Long said of Apple's services business earlier on "Squawk Alley." "Unfortunately, people want this to be more than an iPhone story, but I think ultimately it still is."
Sacconaghi thinks a marriage of the iPhone and the service model could attract more investors to the stock.
"Even if Apple got on earnings calls and said '4 percent of our iPhones were sold on a subscription plan this quarter' and the following quarter they said it was 6 and the following quarter was 8, you'd see the Street pay forward for that and we think we'd give them credit for that," he said.
Bernstein has a $160 price target and market perform rating on Apple's stock. It gained almost 7 percent to close north of $165 in Wednesday's session.
Apple shares jumped after its December quarter earnings release. Many Wall Street watchers had a "better-than-feared" reaction to the report, but Sacconaghi isn't giving a green light to the stock just yet.
"I think it's a do-nothing for now because in the near term the valuation is not compelling," he said. "It's not jump-up-and-down inexpensive."
The tech-heavy Nasdaq climbed 2.2 percent Wednesday.