American Technology Research analyst Shaw Wu took note of Appleis price cut for the iPod Shuffle on Tuesday and stated that the action by Apple will put new pressure on the competition, mitigate one of the key risks lingering from the December quarter and that the cut could provide an incremental gain of one half to a million additional unit sales this quarter.

In his note, Mr Wu provided these analysis points:

• "We view this development as an incremental positive that helps eliminate one of the key risks lingering from its December quarter, namely that being light iPod units (we think from poor low-end shuffle sales) caused AAPL to miss consensus shipments by 2-3 million.
• We would have preferred AAPL cutting shuffle prices last quarter as we believe this would have likely made up for the shortfall (or at the very least narrowed it). We are strong believers in the school of thought that there is elasticity in demand for goods and services (in this case iPods), meaning lower price points will typically bring in a new class of buyers, thus driving incremental demand.
• Going forward, we believe these lower price points will mitigate the risk that AAPL misses iPod unit estimates and possibly even provide a source of upside. We believe these lower-cost shuffles could bring incremental sales of 500,000-1 million units per quarter.
• However, we are not changing our estimates as our iPod unit assumptions were arguably aggressive prior to this price cut and we frankly remain concerned with US consumer spending trends.
• We believe AAPLis new aggressive pricing will likely put pressure on competitors."

The conclusion was that "While near-term trends look difficult with a looming recession and a slow-down in consumer spending, we continue to believe AAPL is well-positioned to weather the storm better than most with its strong fundamentals."

Mr. Wuis target price for AAPL was set at US$175.00 and a "Buy" rating. In morning trading on Tuesday, AAPL is trading at $123.04, up $0.86.

<!--#include virtual="/includes/newsite/series/stockwatch.shtml"-->