Analyst: Apple Positioned for Strong Growth

| Apple Stock Watch

UBS analyst Ben Reitzes was pleased with Apple Computeris earnings report on Wednesday, and thinks the company could be positioned for even more growth. Apple posted its second-highest quarterly earnings fueled by strong Mac sales, good iPod sales, and higher margins.

iPod sales were better than Mr. Reitzes expected, coming in at 8.1 million units instead of his projected 7.8 million. Mac sales showed a 12 percent increase year over year, climbing up to 1.33 million.

He does, however, note that Apple showed weaker than expected performance in Other music, peripheral & hardware, and software revenues. The lower sales may be a side effect of weaker iPod sales.

Appleis mix of hardware is filling out nicely, and the pending addition of an Intel-based replacement for the Pro-level PowerMac G5 and Xserve G5 before the end of the year will balance the product mix.

Mr. Reitzes is especially looking forward to the Apple-branded cell phone that Peter Oppenheimer hinted at during the earnings conference call. "Of all of Appleis new product opportunities, we are particularly excited about cell phones long-term, given our view that consumers clearly want content?but lack true "plug and play" phones with the PC," Mr. Reitzes said.

UBS is raising its earnings per share estimate based on an improved product mix and higher margins. Mr. Reitzes expects Apple to show an EPS of US$0.49 for the fourth quarter of 2006, up from his earlier estimate of $0.47, on revenue of $4.63 billion. EPS for fiscal 2006 has been adjusted up to $2.14 from $2.00. Fiscal 2007 is now $2.65, up from $2.55 based on annual revenue of $23.7 billion.

Mr. Reitzes is raising his target price for Apple from $77 to $80, and maintaining his "Buy" rating.

Apple stock is currently trading at $60.28, up 6.18 (11.42%).

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