Analyst Shaw Wu Raises AAPL Target to $185 Following Q3 Report

by , 11:00 AM EDT, July 26th, 2007

American Technology Research analyst Shaw Wu is optimistic enough about Apple's prospects that he raised his target price for the company's stock from US$165 up to $185. The increase follows Apple's strong Q3 earnings report that showed strong Mac sales.

Apple reported $5.4 billion in revenue and $0.92 EPS for the June quarter, coming in well above the Street estimate of $5.28 billion and $0.72 EPS. Mr. Wu credits Apple's stellar quarter not only to strong Mac sales, but also to the company's strong cash flow which came in at $1.2 billion.

The three big surprises from Apple's earnings report were the 1.76 million Macs shipped for the quarter, up 33 percent year over year, high iPhone ASPs at $600, suggesting most buyers chose the 8GB model, and the robust cash flow.

One key focus point for investors was the number of iPhones shipped between Friday evening on June 29 and the end of day on June 30. Apple reported 270,000 units shipped, which was slightly above Mr. Wu's estimate of 250,000. Some analysts, however, were estimating between 500,000 and 700,000, which led to some claims that Apple failed to meet expectations.

Mr. Wu commented "We believe buy-side investors have learned to form more realistic expectations and to not focus too much on those sell-side estimates that tend to be overzealous and sometimes outright irrational."

Apple once again offered conservative guidance for the current quarter ending in September. Apple is estimating that it will report $5.7 billion and $0.65 EPS. The Street consensus, however, points to $6.1 billion and $0.83, and Mr. Wu is expecting $6.05 billion in revenue and $0.83 EPS.

Along with his new $185 target price for Apple's stock, Mr. Wu is maintaining his "Buy" rating. He is modeling $23.6 billion in revenue and $3.65 for fiscal 2007, up from his earlier estimate of $23.5 billion and $3.50 EPS. For fiscal 2008, he is estimating Apple will report $29.5 billion, down from $30.2 billion, and $4.25 EPS, up from $4.10.

Apple is currently trading at $146.71, up 9.45 (6.88%).

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