UBS Survey: Why Apple Is Winning China

In a report published Thursday, UBS analyst Steven Milunovich maintained a Buy rating on

, with a price target of $150, saying that China had become a critical driver of the company's performance, contributing over 50 percent of growth at above-average margins. Apple emerged as the market share leader in China, despite a decline in the country's total handset sales in the March quarter. "iPhone sales to Greater China exceeded North America for the first time in the March period, and Apple is not only the best-selling high-end smart phone but overall phone," Milunovich mentioned. In the report, UBS noted, "The importance of China to Apple is reflected in Tim Cook's words and actions. The company's strategy to let the market come to Apple is working because (1) the brand is aspirational, in part because of its premium price, and (2) the percent of the population in the upper middle class (RMB 106-229k) is expected to more than double by 2022." Analyst Steven Milunovich expects Apple's success to continue, backed by the substantial flow of people into the middle/upper middle class, improved coverage of China with the rollout of the 4G network, doubling of the company's stores and an improved online presence of the company. "Continued stock price appreciation may depend on at least modest iPhone unit growth in F16, which we think is possible on continued China strength," Milunovich added.