Apple: Services Take Center Stage, Says UBS, Raises to Buy

Hot on the heels of yesterday’s estimate increases for Apple () from Merrill Lynch and Oppenheimer, UBS Securities analyst Maynard Um today raised his rating on Apple from “Neutral” to “Buy” with a $265 target, up from $170.

The most interesting point of Um’s upgrade is that he believes Apple may extend its reach into services for various devices, primarily for delivering content to the iPhone and Macs, and for facilitating integration of Apple devices with social networking services. Um notes Apple’s capital expenditures have risen from $128 million in the year ending September of 2005 to $702 million in 2008 and $804 million this fiscal year. It would be network operations center, rather like Research in Motion’s (RIMM) oft-touted delivery network, that would “we hypothesize will be the foundation for a service that provides seamless access and mobility of digital content across all its products, at any time, and from any place. Similar to Research In Motion’s, the NOC may also help to reduce network congestion through techniques such as compression & push.”

Um sees visibility into iPhone shipments improving with new partnerships, including the Vodafone (VOD) and France Telecom’s (FTE) Orange deals for the U.K. disclosed last week and this week, and he sees Apple margins perhaps getting a boost from a greater mix of iPhones and Macs in the company’s sales versus the lower-margin iPod. Um thinks the Street is too negative about Apple margins, projecting them to be flat or down this fiscal year from last year.

On a related note, Kaufman Brothers analyst Shaw Wu raises his price target on Apple to $214 from $184 on what he believes is strong demand for the new iPod Nano plus video, and some margin assistance from strong sales of Apple’s Snow Leopard operating system, which came out in early September. Wu raised his estimates for this quarter from $8.9 billion in revenue and $1.29 in EPS to $9.1 billion and $1.41.