The UBS analyst who recently said Apple had "somewhat botched" the Apple Watch launch sees China playing a major role in driving sales for the new device.
The insight comes from a new research note based on a UBS survey of 9,000 consumers in six countries released on Monday.
"It's finding that Apple continues to be extremely strong, the stickiness is very clear, and it's China, China, China," Steve Milunovich told "Squawk on the Street." "We're finding that Apple's retention rate is very strong in China, and we're also finding that actually Apple Watch interest is highest in China relative to the other five countries that we surveyed."
UBS also revised its forecast for June iPhone shipments to 48 million units from a previous estimate of 43 million, based on the survey. China is expected to account for 46 percent of iPhone shipments in the fiscal third quarter, up from 28 percent in the same period last year.
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"I feel a little bit better after this survey that there is further growth in China, that the stickiness and the so-called Applesphere, as we call it—the ecosystem—is likely to keep things pretty decent next year, even though it's not going to be as strong of an upgrade cycle as this one," Milunovich said.
For that reason, UBS continues to rate shares of Apple a buy and maintains a $150 price target, he added. The stock was trading at about $129 on Monday.
This month, UBS lowered its outlook for Apple Watch sales for fiscal year 2016, saying it now expects Apple to ship 31 million units rather than its previous estimate of 40 million.
UBS cited lower Internet search levels for the smartwatch relative to an index of 30 consumer products, including the iPad and iPhone. The financial services firm now believes about 7 percent of the estimated 430 million iPhone 5 and iPhone 6 users in 2016 will buy a Watch, down from its earlier 10 percent forecast.
The firm said supply issues negatively impacted the Apple Watch introduction and the company reduced the buzz around the launch by requiring potential buyers to schedule an appointment at retail locations.
In the UBS survey released on Monday, 8 percent of consumers said they might buy an Apple Watch, down from 10 percent in a previous survey.
However, the mix of high-end and more affordable Apple Watch models is developing better than UBS expected, Milunovich said. The firm had previously expected the entry-level Apple Watch Sport to account for about two-thirds of sales, but more expensive models appear to make up half of shipments.
"Units may be weaker, but pricing might be a bit better," he said.