First Albany Raises Apple's 3Q Estimates on iPod, Tiger Strength

First Albany Capital on Tuesday looked ahead to Appleis third quarter earnings results, to be announced on July 13, and said that it was increasing its EPS (earnings per share) expectations from US$0.29 to $0.34 and boosting its revenue forecast $100 million to $3.4 billion. Analyst Joel Wagonfeld made the changes "to reflect upside potential from Tiger and higher iPod assumptions, offset by lower Mac mini sales," according to a research report obtained by The Mac Observer.

Mr. Wagonfeld says that the 2.8 million copies of Mac OS X v10.4 "Tiger" sold during the quarter will add about a nickel to EPS, with Wal-Martis full rollout of iPod sales contributing another penny. He adds that he has raised his iPod sales forecast from 4.25 million units to 5 million units sold during the quarter, bumping revenue derived from the MP3 player to $925 million.

On the Mac mini front, Mr. Wagonfeld dropped a penny from Appleis EPS estimate because he lowered his sales forecast from 400,000 units to 250,000 units. "However," he writes: "we believe iMacs had a solid quarter, so weire maintaining our projection for 210K iMac units."

Regarding the "halo effect" that many believe iPods will have on sales of Macs, the analyst notes: "We believe there has likely already been some immediate halo effect due to higher awareness among computer customers. However, we note that, as seen below, nearly two-thirds of total cumulative iPods shipped have been sold within the last two quarters. Assuming there is some lag between a customeris purchase of an iPod and that customeris eventual purchase of a new CPU, this suggests it will be at least another quarter or two before the potential magnitude of any halo effect on Appleis CPU sales can be fully determined."

Mr. Wagonfeld maintains his "Buy" rating on Appleis stock and gives a $44 12-month price target. Apple shares were at $37.72 by noon EST on Tuesday, a 3.34% increase for the day.

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