Mac demand may bump AAPL

Consumers continue to show strong demand for Mac systems which could bump Apple's fourth quarter earnings, offsetting a deceleration in iPod sales, according to research firm UBS. "We believe Mac momentum should continue into year-end given new products and helped in part by the delay of [Windows] Vista," said UBS analyst Ben Reitzes. The firm lowered its sales estimates for Apple, but maintained earnings-per-share expectations due to high margins. The analyst holds fourth quarter estimates of $0.50 -- in line with Wall Street expectations -- reflecting 26 percent year-over-year revenue growth (six percent quarter-over-quarter) to $4.62 billion (previously $4.65 billion) vs. consensus estimates of $4.67 billion due to lower iPod units (8.12 million vs. 8.52 million). UBS holds a price target of $92 on Apple shares, reiterating its "buy" rating.

For fiscal year 2007, UBS estimates $2.70 based on 21 percent year-over-year revenue growth to $23.1 billion -- above Wall Street's consensus of $22.9 billion -- with iPod sales of 50.2 million vs. 52.8 million. UBS maintains its earnings-per-share estimates due to higher margins from Macs and software. The firm holds its target based on 30 times its 2008 estimate, above its peers in PCs due to much faster growth and higher margins, according to the analyst. Strong Mac sales help bridge the gap between now and new products next year, starting with Macworld on January 8th.

"We believe that Apple has many new products in the pipeline set to hit through the first half of 2007, which should drive a re-acceleration of revenue growth. Next year, we expect new video iPods with bigger screens, more content deals, the iTV media hub, cell phones and potentially ultra portables," the analyst said.

by MacNN Staff