Lehman Targets Apple at $64; Ups Earnings Forecast (UPDATED)

Lehman Bros. analyst Harry Blount has raised his stock price target for Apple Computer (AAPL) to US$64 from $46 and increased his fourth-quarter earnings and revenue forecasts.

Citing expectations that busy retail traffic and strong demand for iPods will continue through the holiday season, Mr. Blount lifted his earnings estimate to 45 cents a share from 41 cents and his revenue forecast to $3.1 billion from $2.9 billion. He reiterated his iequal weighti rating on the stock.

He also raised fiscal year 2005 revenue and earnings pre share estimates to $11.9 billion and $1.53, respectively.

Saying Apple "is likely to see continued momentum in the holiday season," Mr. Blount wrote to clients, "Our checks indicate busy retail traffic at Apple retail stores with strong sales of iMacs and iPod miniis."

In his report obtained by The Mac Observer, Mr. Blount wrote that it appears green and gold iPod minis are the most popular product this holiday season, as well as the 20 gigabyte iPod and the 17-inch Bluetooth-ready G5 iMac, "with stores selling stock in 3 to 4 days," he wrote.

Mr. Blount believes iPod shipments in the current quarter will be 3.9 million, up from his previous estimate of 3.2 million. This is his second increase in the iPod estimate in five weeks. On October 28, Mr. Blount had predicted iPod sales of 2.9 million. "We estimate that iPod revenue will be $982 million this quarter, up 83% from last quarter," he wrote.

The Lehman analyst still believes Apple will announce a flash-based portable media device next month at Mac Expo in San Francisco. "We believe that this product will be priced at approximately $149," he wrote. "We estimate that Appleis flash player will generate sales of $720 million on unit shipments of four million, which would represent a 12% share of the flash player market estimated at 34 million units in 2005,"

Mr. Blount believes there is no negative news to stop Appleis share price from moving into positive territory between now and the end of January. Strong holiday sales, continued upward estimates revisions on iPod sales and Expo in January are all strong catalysts he wrote that "are fairly reflected in the current stock price" of around $65.