Apple shares will thrive this year due to tax reform, according to one Wall Street firm.

Bank of America Merrill Lynch reiterated its buy rating and raised its price target to $220 from $180 for Apple shares, which is 25 percent above Tuesday's closing price. It is also the highest target among major investment banks that cover Apple. The $220 forecast represents a $1.1 trillion market valuation for the company.

"We remain bullish on potential for cash repatriation, lower tax rates, and the potential for positive estimate revisions heading into 2019," analyst Wamsi Mohan wrote in a note to clients Wednesday. "A smoother iPhone cycle (no boom-bust) should drive increased stability in earnings, commanding a higher multiple."

Mohan noted that Apple has $253 billion in overseas cash. He estimates $236 billion is available to be repatriated to the U.S. at the new 15.5 percent tax rate under the tax reform bill.

"After paying out the taxes, Apple would have $200bn of cash back on-shore in the U.S. (which it could potentially use for buybacks, dividends, or M&A)," he wrote.

Only Drexel Hamilton has a higher price target for Apple at $235.

On the flip side, Longbow Research on Wednesday lowered its rating for Apple shares to neutral from buy, predicting the company will ship fewer iPhones than expected in fiscal 2018.



Apple shares were up fractionally in Wednesday's premarket session after the reports.

— CNBC's Michael Bloom contributed to this story.