NEW YORK ( TheStreet) -- Apple ( AAPL) shares rose 1.03% to $506.24 as UBS raised its price target on the tech giant, citing a potential deal with China Mobile ( CHL) and the iPhone 5C costing more than initially thought. Analyst Steven Milunovich raised his price target to $560, and kept his "buy" rating, noting the potential for a deal with China Mobile could be enormous, as the world's largest carrier has approximately 100 million 3G users. "We expect a deal to be struck with China Mobile before year end," Milunovich wrote in his note. He expects an additional 17 million iPhones sold via China Mobile in fiscal 2014,with 70% of them being iPhone 5C, and 30% coming from iPhone 5S, adding $3.25 in additional earnings per share. Milunovich notes that ever additional 1 million units adds 20 cents per share. Apple is expected to unveil the iPhone 5S and iPhone 5C to the world Sept. 10. Availability details have been sparse, but recent rumors have suggested the phones would be available in Japan on Sept. 20, thus keeping in line with Apple unveiling a phone and making it available in a relatively short amount of time. A potential deal between Apple and China Mobile appears to be close. China Mobile Chairman Xi Guohua was optimistic earlier this monthabout a deal between his company and the iconic iPhone maker, saying the two sides are "actively negotiating," but that there are some "commercial and technology issues that need time to resolve." Apple has partners in China, as it has deals with China Unicom ( CHU) and China Telecom ( CHA), but a deal with China Mobile would change everything. China Mobile has recently ceded share of higher-end subscribers to both of those carriers, but a deal for the iPhone could change the fortunes of Apple in China, which has seen decline revenues. "A deal with China Mobile, assuming reasonable subsidization, is one of the more positive potential catalysts for Apple," Milunovich penned in his note. In Apple's latest quarter, revenue from China fell 43% sequentially, and 14% year-over-year to $4.64 billion. On Apple's recent earnings call, Cook noted that some accounting and inventory factors weighed on China, but it wasn't clear what exactly happened.
In addition to a potential deal with China Mobile, the iPhone 5C, as it's currently being dubbed, may be priced to be more expensive than initially thought. Milunovich now believes the phone could cost $399, up from $379, and have a bill of materials (BOM) that would actually increase Apple's margins, not hurt them. He now believes the BOM will allow Apple to have 38% gross margins on the phone, up from 32% initially. "The combination of the $20 higher ASP and gross margin of 38% increases our F14 EPS estimate from $42.29 to $44.65," Milunovich wrote in his note. -- Written by Chris Ciaccia in New York >Contact by Email. Follow @Chris_Ciaccia