Needham Raises Apple's Earnings Estimates, Maintains 'Buy' Rating

Needman & Co. analyst Charles Wolf on Monday released a research report in which he raised his 2005 and 2006 earnings estimates for Apple to US$1.40 and $1.65, respectively, and maintained his "Buy" rating as well as his $52 price target for the companyis stock. In the report, a copy of which was obtained by The Mac Observer, Mr. Wolf wrote: "Apple extended its string of upside revenue and earnings surprises in the third quarter. The two key drivers of the Apple story continued to work -- the iPod and halo effect."

The analyst noted that iPod shipments rose "despite numerous observations that sales were soft" and said that "the iPodis sales momentum should continue as Apple increases the number of outlets carrying the product and HP rolls it out through its distribution network." However, he did feel that the iPodis spectacular increases "will moderate going forward. However, as the installed base of Windows users owning iPods continues to grow, fueling purchases of Macs, we anticipate that the growth in Mac sales will easily outstrip PC industry growth for the foreseeable future."

However, Mr. Wolf did moderate his growth estimates for 2006 Mac shipments because of the transition to Intel processors. "Itis possible, if not likely," he writes, "that many customers will postpone their purchases of Macs in anticipation of this event, which could extend into 2007. We expect the iBook and PowerBook will be the first Mac models to ship with Intel processors because Appleis notebook lineup has been confined to G4 processors far too long as it is. The Mac Mini could also be an early candidate for an upgrade."

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