BMO capital Markets analysts Keith Bachman, Jung Pak and Gaurav Gupta maintain their Outperform ratings for Apple Inc. (NASDAQ:AAPL) as the tech giant launches its iPhone in partnership with China Mobile Ltd. NYSE:CHL) (HKG:941).

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Apple China Mobile Deal

The iPhone was officially available at China Mobile Ltd. (NYSE:CHL) (HKG:0941) on January 17, and we wanted to revisit our thoughts on the opportunity in China.

Apple Inc. (NASDAQ:AAPL): Impact & Analysis

Preorders at China Mobile started on December 25, and China Mobile Ltd. (NYSE:CHL) (HKG:0941) has indicated that preorders exceeded 1 million units. We believe that iPhone sales are currently being fulfilled by China Mobile, compared with past launches by Apple Inc. (NASDAQ:AAPL) directly. Therefore, we believe that some amount of iPhone sales to China Mobile will be captured in the December quarter, but most in the March quarter. We believe the iPhone price cuts by China Telecom Corporation Limited (NYSE:CHA) and China Unicom (Hong Kong) Limited (NYSE:CHU) could help stimulate near-term demand, which we think has modestly slowed prior to the iPhone launch at China Mobile. Given the price cuts, we note that the iPhone is more expensive at China Mobile than it is at China Telecom and Unicom.

Apple Inc. (NASDAQ:AAPL) iPhone 55 sales

We project iPhone sales of 55 million units in the December quarter, with some upside tension, and around 41 million units in the March quarter. Consistent with our past comments, we continue to believe that China Mobile could add around 15 million iPhone units in CY14, and the estimated installed base of around 50 million iPhone subscribers on China Mobile Ltd. (NYSE:CHL) (HKG:0941)’s network remains a large upgrade opportunity. Further, we note that the iPhone is being rolled out to over 3,000 China Mobile retail outlets (and customers need to have a reservation), rather than just a handful of Apple stores. Hence, we think it is reasonable to assume shorter lines.

Valuation & Recommendation

Our $585 price target is based on 13x our CY14 EPS estimate. We remain Outperform on Apple Inc. (NASDAQ:AAPL).