Price target raised to $154 from $150 as iPhone sales and earnings per share estimates also lifted at Morgan Stanley

Shares of Apple Inc. rallied to an all-time intraday high Tuesday, and was on track for a record close, after an upbeat research report from Morgan Stanley, which cited optimism over the outlook for China sales.

The stock climbed 0.5% in morning trade to change hands at $136.35, and was up as much as 0.7% at an intraday high of $136.62. That topped the previous record intraday high of $136.27 reached on Feb. 15. The record closing high of $135.72 was hit on Friday.

Analyst Katy Huberty raised her stock price target to $154, which was 13% above current levels, from $150. She believes that investor concerns that Apple has lost its edge in China—following a 24% decline in China sales over the past year—are misguided.

“Our analysis of upgraders and switchers suggests China could contribute outsize growth in [fiscal year] 2018,” Huberty wrote in a note to clients.

FactSet

Huberty expects the new higher-priced iPhone to be introduced in September will have new display technologies used in smartwatches that allows for a curved form factor and longer battery life. She expects the new iPhone will also include wireless charging technology, 3-D sensors and more-advanced artificial intelligence software capabilities. And that could be enough to excite Chinese consumers.

“While we see accelerated upgrades for Apple’s highest end users in all regions, our work suggests China users are especially sensitive to new technology and for factor changes,” Huberty wrote. “In fact, our survey work suggests one in five local Chinese branded smartphone users will switch to iPhone upon their next purchase.”

Apple’s stock AAPL, +0.40% has run up 42% over the past 12 months, while the technology friendly Nasdaq-100 Index NDX, +0.29% has rallied 28% and the Dow Jones Industrial DJIA, +0.45% has climbed 26%.

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Huberty said she now expects a “base case” of 72 million iPhones shipped in China during Apple’s fiscal year ending September 2018, which is 27 million above the current run rate, and well above consensus expectations for an increase of 19 million. She also raised her fiscal 2018 total iPhone sales estimate to 260 million, which is above the consensus of about 241 million.

Huberty expects 2018 earnings per share of $11.00, which is above the FactSet consensus of $10.08.

“We believe consensus estimates and share price will rise over the next six months to reflect bullish supply chain data points and the China opportunity,” Huberty wrote.

Read this article in its original format at MarketWatch.com

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