UBS Analyst: Apple Inc. (AAPL)’s Issues in China Likely Overblown Near Term, but Underscores Existential Threat

UBS analyst Steven Milunovich came out with a commentary on Apple Inc. (NASDAQ:AAPL), after the tech giant suffered another setback in China, with word that a Beijing court has barred Apple from selling the iPhone 6 and iPhone 6 Plus in the city, ruling that the design is too similar to another smartphone sold within China (Shenzhen Baili’s 100c device). However, the court allowed Apple to continue selling its iPhone 6 phones in China pending an appeal.

Milunovich commented, “We have written that China is an existential threat to Apple in that the government could decide to favor local suppliers. However, we view this as a long-term risk. In F15 before China slowed, the country represented 25% of revenue and 27% of operating profit as well as 53% of revenue growth and 45% of operating profit growth.”

“Street estimates and price targets continue to fall. We cut our iPhone estimates and earnings a few weeks ago based on our new installed base model suggesting little iPhone growth in F17 with a stronger rebound in F18. Jabil’s earnings report confirmed what carriers have said—there will be no improvement until the iPhone 7 and plenty of question marks even then. The irony is that as the product cycle weakens, the ecosystem arguably strengthens with enhancements to Apple’s platforms,” the analyst continued.

The analyst reiterates a Buy rating on shares of Apple, with a price target of $115, which represents a potential upside of 20% from where the stock is currently trading.

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Steven Milunovich has a yearly average return of -0.2% and a 42% success rate. Milunovich has a -1.7% average return when recommending AAPL, and is ranked #2602 out of 3974 analysts.

Out of the 38 analysts polled by TipRanks (in the past 3 months), 32 rate Apple stock a Buy, 5 rate the stock a Hold and 1 recommends to Sell. With a return potential of 30%, the stock’s consensus target price stands at $123.97.


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