Analyst Upgrade: Does China Make Apple a Buy?

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Shares of tech giant Apple (NASDAQ:AAPL) climbed as much as 1.8 percent in morning trading Tuesday after analysts at UBS upgraded the stock to Buy from Neutral. The firm increased its price target to $650, about 18 percent above Monday’s closing price. The firm’s previous price target was $540, which shares shot past late in November, when the price broke from a multi-week plateau around $520.

In a note seen by MarketWatch, UBS suggested two tailwinds that could support the stock over the next 12-month period and drive the price toward its target. First, at 61 percent, institutional ownership is relatively low. This is down about 9 percent from April 2012, when Apple stock hit a mini peak of about $630 per share, and just a few months before shares hit their all-time highs in September, after which many institutional investors trimmed their positions.

But the stock appeared to bottom out about halfway through 2013, and UBS thinks the time is right for some big buyers to shore up their positions in the company. “Our sense speaking with investors is that many are now equal or underweight Apple relative to their benchmark, which could result in new money supporting the stock,” said the firm.

So it’s possible that institutional investors could bid up the stock, and it’s possible that bullish analyst notes could compel the herd to bid up the stock on high expectations, as well. This is OK, but a thin argument for any bullish thesis. If real support is coming, it will probably be from a new product launch or developments in China.

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