AmTech Research Sees Strong 2GB nano, shuffle, Aperture Sales; Raises Estimates

| Apple Stock Watch

American Technology Research analyst Shaw Wu on Tuesday issued a new research report that covered the results of his recent checks with industry and channel sources, which showed "a better-than-expected pick-up in sales of 2GB iPod nanos, iPod shuffles and [Appleis] new $499 Aperture professional photography software," he wrote. As a result, he increased his current quarter estimates from US$4.8 billion and $0.52 EPS to $4.9 billion and $0.54 EPS.

Mr. Wu also bumped his iPod shipment forecast from 9.4 million units to 9.7 million and assumed a new ASP (average selling price) of $196, reflecting "less discounting than we anticipated." Based on his belief that the 2GB nanos and shuffles bring in higher margins for Apple because of cheaper NAND flash prices for the lower capacity, Mr. Wu also took his gross margin number from 27.6% to 27.8%, which should add $2 or $3 million to Appleis net income for the quarter.

"We believe a surge in demand for 2 GB iPod nanos at $199 may surprise most iPod followers," he wrote. "We believe AAPLis bet on a $199 price point has paid off (like it did with the $199 4 GB iPod mini) as it built more of these models (and with better margins versus the $249 4 GB nanos) as it appears that holiday shoppers (particularly first-time iPod buyers) are more concerned with the price point as opposed to the storage capacity."

The analyst also reiterated his "Buy" rating on Appleis stock and increased his 12-month price target from $66 to $77, keeping the company one of his top picks. "We believe AAPL is well-positioned to continue above market growth rates with arguably the industryis most powerful and complete stack of hardware, software, and service," he wrote.

Despite positive advances by the Nasdaq and Dow as of noon EST on Tuesday, Appleis stock was down 0.47% to $69.33.

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