by , 6:05 PM EDT, October 6th, 2004

First Albany Capital has issued a 'Buy' rating for Apple's stock, raising its target from US$35 to $44, saying the company is likely to report its fiscal fourth quarter earnings per share one cent ahead of the industry concensus of 18 cents.

Analyst Joel Wagonfeld told clients in a report obtained by The Mac Observer, "we think investors are expecting continued upside, and we believe Apple has room to continue to exceed expectations based on multiple growth drivers." But he acknowledged Apple shares could come under pressure in the coming months as it becomes "increasingly difficult to justify (its share price) as competition and comparisons get tougher."

Mr. Wagonfeld also wrote earlier estimates of iPod sales for the just-finished quarter will probably be broken. "Easing of (iPod) mini supply constraints, initial stocking of the (Hewlett Packard) "hPod" and strong demand for "white" iPods should render our existing 1.25 billion iPod estimate low," he wrote.

Mr. Wagonfeld also said PowerMac and PowerBook unit sales appear solid to him and demand for the G5 iMac is significant. He cautioned that if Apple ships the majority of new G5 iMacs via more expensive airfreight - as has been the norm with previous big product launches - profit margin will suffer.

While the iPod will face a slew of new competitors this holiday season, Mr. Wagonfeld said he believes Apple's market share of almost 50% will feel little impact. "Pricing does not appear to be as big of a selling point as we had expected," he wrote. He sees this as a positive because if prices don't have to come down, competitors even with similar portable player functionality won't be able to unseat Apple's iPod and "it suggests Apple may not face significant pricing pressure as quickly as we had anticipated."

Mr. Wagonfeld held his highest praise for last as he said he believes Apple's core business is "holding up better than expected" thanks to iPod owners also buying Macs.

"The "halo affect" (is) beginning to have a positive effect (on Mac sales)," he wrote. "eMac (sales) were especially strong at 183,000 units suggesting success in the education and low-end segments. Over the next few quarters, we expect core Mac sales to be strong based on the ramp of the new G5-based, all-in-one iMac, which has received rave reviews and strong initial demand."

Apple will announce its fiscal fourth quarter results Wednesday, October 13th after the close of the stock market. A conference to discuss the quarterly results will be broadcast live via QuickTime at 5pm EDT. As always, The Mac Observer will provide in-depth coverage.

Analysts polled by Thomson First Call currently expect Apple to earn 18 cents a share, on $2.1 billion in revenue, for its just-ending fiscal fourth quarter. During the same period a year ago, Apple earned 8 cents a share on revenue of $1.71 billion.

Brad Gibson contributed to this article.