The Ratings Game: Apple looks strong in China ahead of earnings, says UBS

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Apple Inc. got a big vote of confidence from UBS, but it may not be enough to power shares toward yet another record high.

UBS analyst Timothy Arcuri raised his Apple AAPL, -0.21%  price target to $275 from $230 on Thursday, with the new target representing one of the highest on Wall Street. He’s upbeat about iPhone demand heading into Apple’s September-quarter earnings report Tuesday and expects that the stock can keep grinding higher over the long term.

Apple shares are off 0.3% in Thursday trading.

“On a relative basis, we acknowledge that things probably won’t get a whole lot better than this and Sept/Oct have typically been the worst time to buy in recent years for relative performance, but as investors roll this sort of multiple forward to include more of the big C20/21 period, we think the stock can still move higher – especially as the ‘tail effect’ from it still being such a big global underweight might last for some time,” he wrote.

See also: Microsoft earnings trounce expectations, but Azure growth rate continues to shrink

For the latest quarter in particular, Arcuri said that third-data points look encouraging in China and suggest that Apple showed better seasonal strength there in September than it did a year ago. “More importantly, there has been growth in two of the last three months following declines for two and a half years,” he wrote.

In general, Arcuri sees iPhone 11 estimates as being too low, writing that despite the lack of high-profile new features, Apple looks well positioned to drive upgrades given a relatively high portion of iPhone 7 and iPhone 7+ devices that are still in use.

“Build plans for 2019 iPhones have been muted, but recent data suggests a slight uptick given higher demand,” he wrote.

Arcuri’s note follows one from Morgan Stanley a day earlier that set a new Street-high price target for Apple on optimism for the company’s Apple TV+ service.

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Shares have climbed 54% so far this year as the Dow Jones Industrial Average DJIA, -0.25%  has added 15%.

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