Analyst: Apple Outlook is Conservative

by , 10:50 AM EST, January 3rd, 2007

Investors may be underestimating Apple Computer's value in 2007 in contrast to 2006, according to American Technology Research analyst Shaw Wu. He commented "As we look out over the next 6 to 12 months, consensus estimates, in our view, look reasonable, and will likely prove conservative, a very different scenario than in 2006. "

He added "One of our key concerns on Apple in 2006 was that we believed published consensus estimates were too aggressive (particularly revenue) and no where near Apple's guidance, but more importantly, didn't make any logical (financial or business) sense."

Mr. Wu feels that Apple's estimates have finally reset, which will give the company room to surprise investors on the upside. The company's expected product line up for 2007, which includes Mac OS X 10.5, the iTV home theater appliance, refreshed iPod models, new Macs, and possibly a cell phone product, should offer strong momentum throughout the year.

The December quarter will likely show US$6.4 billion in revenue and $0.79 in EPS along with 15.5 million iPods sold.

For fiscal 2007, Mr. Wu is estimating Apple will post $23 billion in revenue and $2.85 EPS. Looking forward to 2008, he predicts Apple will report $28.1 billion in revenue and $3.50 EPS. That estimate is based on 23 percent growth in Mac sales to 8.8 million units, 9 percent growth in iPod sales to 47.3 million units, and an additional $326 million in sales from cell phone products.

Mr. Wu is maintaining his "Buy" rating for Apple, and a target price of $99. Apple stock is currently trading at $85.74, up 0.90 (1.06%).

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