Analyst: Apple’s Best Defense is a Strong Offense

Earlier this week, UBS analyst Steve Milunovich once again reiterated a Buy rating on Apple (NASDAQ:AAPL) stock while lowering his price target. While his price objective was as high as $780 in December, the analyst’s target for the stock is now $600, which represents a 38.9 percent upside to the stock’s closing price on March 8th. This compares against a 36.7 percent slide in the company’s stock price over the past six-month period ending on the same date.

Earnings forecasts have dropped alongside targets for the stock price. With his January cut, Milunovich reduced his profit estimate for fiscal-year 2013 from $47 to $44.68 per share, and his fiscal-year 2014 estimate from $55.85 to $52.80 per share. These reductions were largely the result of a survey conducted by Consumer Intelligence Research Partners, which found that demand for storage had declined — meaning fewer people would opt for pricier 64 GB iPhones — while demand for older models increased 50 percent in the iPhone 5 cycle, compared to just 33 percent in the iPhone 4s cycle. The result of this shift could yield a reduction in gross margins of up to 10 points.

But there’s still upside, and through all the turbulence caused by numerous analyst research notes on the stock, Milunovich has maintained that a deal with China Mobile (NYSE:CHL) remains a massive potential catalyst for the company. Such a deal could open up a torrent of revenue, and squelch controversial suggestions that Apple should break stride and play defense, instead of leading in innovation as it has historically done…