AAPL 2nd best quarter?

American Technology Research senior analyst Shaw Wu today commented on Apple's forthcoming report of its March quarter financial results, and believes the company will report the second best quarter in its 30 year history. Wu says Apple may exceed its guidance of $4.3 billion in revenue and $0.38 in EPS, modeling $4.4 billion, $0.43, and 8.8 million iPods versus a market consensus of $4.6 billion and $0.44. "We continue to believe Apple will guide conservatively reflecting efforts to reduce inventory of PowerPC Macs and older iPod nanos," Wu wrote in a research note obtained by MacNN. The analyst said that consensus revenue estimates for the June quarter remain unrealistically high, however, and warns that Apple will likely make another attempt to reset expectations. American Technology Research maintains a "Buy" rating on Apple's stock.

Citing the recent 16 percent run-up in Apple shares, Wu said he would not be surprised to see a pullback post-print. The analyst said he finds Apple's valuation very inexpensive, and suspects the company is ready to deliver upside with strong second-half seasonality along with solid product momentum, including a new low-cost Intel portable notebook and changes in its iPod line-up.

"We find the risk-reward on Apple shares attractive trading at 26x our calendar year 07 EPS of $2.59 (22x excluding net cash), indicating a PEG ratio of 0.8 for a company we are modeling to grow 35 percent over the next 12 months," Wu wrote.

The analyst thinks Apple's move to digital entertainment is a multi-year trend, and that the company is ready to capitalize with its unique, defendable iPod + iTunes and Mac franchises.

"We believe Apple is well-positioned to continue above market growth rates with arguably the industry's most powerful and complete stack of hardware, software, and service addressing the digital entertainment space," Wu noted.

by MacNN Staff