Bank of America Merrill Lynch Ups Price Target on Apple to $600

Scott D. Craig, Research Analyst at Bank of America Merrill Lynch (NYSE: BAC) maintained a Neutral rating on Apple (NASDAQ: AAPL) but increased the price target to $600 a share.Craig cautioned investors that the recently finalized agreement with China Mobile (NYSE: CHL) might yield unrealistic and high expectations amongst investors.“While we assert that China Mobile is a clear positive, we believe incremental units should be less than 10mn. This will likely result in modest EPS estimates increases (still positives), as opposed to significant increases that some investors are expecting,” the analyst wrote in his research report. “We continue to believe expectations of incremental 20-30 million+ iPhone annual unit sales may be optimistic given there are already 30mn+ iPhone users on CM networks,” the analyst added.The analyst believe that a more reasonable expectation would be for incremental sales of less than 10 million units.The iPhone 4S and 5C are unlikely to prove to be competitive due to the hefty price tag that comes with it. The iPhone 4S and 5C are expected to sell for $500 and higher. The analyst noted that channel checks from Asia “do not indicate higher than seasonal iPhone production ahead of potential C4Q13/C1Q14 sales of China Mobile deal.” This finding would support the thesis that the China Mobile deal may be over-estimated by some. Investors should focus on guidance the company gives during its next earnings call. According to the analyst “providing roughly inline with normal seasonality revenue guidance for C1Q14 would be disappointing to Street/investors, as it would basically imply limited impact from China Mobile.”The analyst maintained its first quarter 2013 and EPS estimates of $58.0 billion and $14.25, slightly above the Street's estimate of $57.2 billion and $13.00, respectively. The company estimated date to report its results is currently set for January 23, 3014.