by , 8:40 AM EST, January 18th, 2007

Apple reported that it sold 1.6 million Mac in the December quarter, below the 1.75 million units analysts projected. That number, according to Piper Jaffray analyst Gene Munster, isn't as big a deal as investors are making out.

"Despite initial investor reaction, we believe the Street will eventually view the December Mac number as positive... The Street got ahead of itself," he said.

Mac sales numbers were flat, compared to the same quarter last year - which puts them in line with average performance over the past five years. Overall marketshare, however, is up. The year over year gain inched up from 2.1 percent to 2.4 percent. Q3 2006 did jump up to 2.8 percent thanks to strong education sales in September, and Apple is likely to bounce back up again after Adobe Creative Suite 3 ships this spring.

The post-CS3 climb projection is based on estimates that about 15 percent of Apple's installed base are pro Adobe application users.

iPod sales were well above the Street's 15.75 million units at 21.1 million. Assuming that 75 percent of the iPods sold during the quarter went to first-time buyers, Apple saw a 29 percent increase in its user base. The increased number of iPod users adds a substantial number of potential first-time Mac buyers to the mix.

Apple's guidance for the next quarter is typically conservative, and that was the case during Wednesday's financial report. The company projected that it will see revenue between US$4.8 and $4.9 billion, 7 percent below analyst's $5.22 billion, with an EPS between $0.54 and $0.56, 8 percent below the $0.60 consensus.

Mr. Munster commented "Apple has made a habit out of guiding conservatively, typically guiding at or slightly below consensus for the next quarter. The company has also, however, made a habit of beating its conservative guidance. On average, the company beats the mid-point of its revenue guidance range by 9 percent."

Mr. Munster is raising his target price for Apple from $99 to $124 based on a target multiple of 40x CY07E EPS, in line with the four-year average price/NTM EPS multiple for Apple. He is maintaining his "Outperform" rating.

Apple stock is currently trading in the pre-market at $93.16, down 1.79 (1.89%).