A Chinese woman reacts while setting up the facial recognition feature on her iPhone X inside an Apple showroom in Beijing on November 3, 2017.

Apple's stock could "re-rate" and tear higher if the company makes a fundamental change to its business and shifts to a monthly subscription model, according to a top Apple analyst, Toni Sacconaghi of Bernstein.

The iPhone maker has historically traded at a relatively low earnings multiple relative to the market as investors see it as a hardware manufacturer.

"We believe that for Apple to trade at a materially higher multiple, it needs to migrate its transactional selling model to a subscription based model," wrote Sacconaghi on Tuesday. "As consumers become increasingly accustomed to paying monthly subscriptions, especially for key 'tech utilities' (e.g. Netflix, Spotify, Microsoft Office 365), we could imagine Apple implementing a subscription plan of its own."

Sacconaghi's $195 price target represents 15 percent upside from Tuesday's close; Apple shares closed roughly 0.4 percent lower Wednesday.

While Apple shares are up 46 percent this year through Tuesday's close, iPhone was the tech giant's weakest growing business in the last quarter, contributing just 1.5 percent to the company's overall growth. All other businesses grew double digits, according to the analyst, a sign Apple may want to explore other growth avenues going forward.

Sales of new products and services outside of Apple's core hardware franchise could contribute 260 to 490 basis points of total company revenue growth per year, according to Bernstein research. (A basis point equals 0.01 percent.)

"Customers could lease iPhones, iPads, Macs, and services such as iCloud and Apple Music for one 'low' monthly fee, and have their hardware upgraded after a certain number of years," suggested Sacconaghi. "By moving to a subscription model, Apple would be able to lock in recurring revenue streams and freeze the length of replacement cycles, likely leading to a material re-rating of its stock's multiple."

To be sure, the analyst also sees tax reform as a positive for Apple's business and a way to raise its multiple. Should Republicans cut the corporate tax rate to 20 percent as planned, the company could see an 18 percent boost in reported earnings per share versus a 6 percent lift for technology overall.

"The upshot is that under the new tax reform bill, Apple would enjoy a lower 20 percent U.S. tax rate on its domestic earnings, and also would no longer accrue any U.S. taxes on its offshore earnings," concluded Sacconaghi. "In effect, this would mean that Apple's overall global tax rate could decrease from 25.5 percent to 11.9 percent, resulting in an 18 percent boost to reported EPS."

Correction: Apple shares fell more than 1 percent in early Wednesday trading. An earlier version misstated the day.