Buffett On iPhone: Apple Has Products People Would Use, 'Not That I Do'

Warren Buffett ventured outside of comfort zone in 2016 when he took a large stake in tech giant Apple Inc. AAPL.

Historically, Buffett has shied away from tech companies, but UBS analyst Steven Milunovich understands why Buffett decided to buy 133 million shares of Apple. He believes Apple is far from the typical tech company, and its unique position mitigates much of the risk typically associated with the tech sector.

Buffett's Piece Of The Apple Pie

"Apple strikes me as having quite a sticky and enormously useful product that people would use, not that I do," Buffett said of the iPhone in a recent CNBC interview.

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According to Milunovich, there are three things Buffett likes about Apple:

1. He sees Apple as a consumer company as much as a technology company.
2. Buffett sees Apple as somewhat of a “tech utility” company, meaning it isn’t vulnerable to market shifts the same way other tech companies are.
3. Due to Apple’s massive cash position and aggressive buyback program, the stock doesn’t need to expand its market cap to generate significant upside.

“Consequently, Apple might never be a $1 trillion market cap, but it doesn’t need to be to be worth owning.” Milunovich concludes.

UBS has a Buy rating and a $151 price target for Apple. The price target is based on a projected 16.5 PE on estimated fiscal 2017 EPS of $9.10.