Merrill, UBS Up Apple Stock Estimates

As consumers start spending on Christmas, two brokerage houses raised their estimates on Apple Computer (AAPL) stock Monday to more than US$77, predicting the companyis iPod line of digital media players will be music to the ears of consumers.

Saying Apple will sell four million iPods this quarter, Merrill Lynch & Co. analyst Steven Milonovich raised his target share price to $78 from $61 and upped its fiscal year 2005 earnings per share estimate to $1.45 from $1.38. He said he now expected $1.80 earnings per share for 2006, up from $1.71.

Mr. Milonovich, who rates Apple shares as a "buy", told investors to look out for a flash memory-based iPod from Apple in the first quarter and other possible products like an entertainment server. Mr. Milonovich is the same analyst who predicted the iPod photo would not debut until sometime next year. Instead, it was announced within a week of his original prediction on October 25.

UBS analyst Benjamin Reitzes raised his target on Apple to $77 from $66 a share and rates Apple shares as a "buy 2."

Mr. Reitzes quoted a new survey of U.S. retailers that showed iMacs and accessories were selling "very well" and that demand for the iPod photo and iPod mini was strong.

UBS raised its fiscal year 2005 revenue estimate to $11.1 billion from $10.9 billion and sees earnings per share for the year at $1.40, up 10 cents. UBS increased its first quarter earnings per share forecast by three cents to 46 cents and increased 2006 fiscal year EPS and revenue forecasts to $1.75 and $12.6 billion, respectively.