Apple named top stock pick for 2006

Analyst picks Apple

Piper Jaffray has named Apple's stock as one of the for calendar year 2006, indicating a strong faith in the ability of the company, along with Adobe and Avaid, to outperform others. Despite mounting investor sentiment that Apple's growth has peaked, analyst Gene Munster says that the company can continue to perform because of its ability to improve the iPod and its ability to develop innovative products in the coming year. Munster also cited the expected release of new Intel-based Macs at this year's Macworld Expo. Given the explosive popularity of iPod products and Apple's general resurgence in the market, Munster sees Apple as a "malleable" company and an attractive investment.

"Investors believe the easy money has been made, but we see more upside potential in Apple's business, and sentiment suggesting that growth has peaked leads us to believe that AAPL shares will respond positively to any outperformance."

The research firm also picked Adobe and Avid among the top stocks of 2006--for many of the same reasons: popularity, flexibility within the market and strong new releases.

Currently Apple shares are trading near $75--up 0.32 percent. Piper Jaffray expects that gains of 0.5-1.0 percent of the PC market share-- likely in the face of expected new products and a solid customer base- would add 10-18 percent to Apple's estimated per-share earnings. Apple performed strongly in 2005, mostly due to the new iPods, and outlooks are positive that the new Macs can produce similar results in 2006.

The firm also noted that a small increase in Mac marketshare would lead to large effect on the company's earnings estimates. An increase in marketshare of 0.5% during 2006 could as much as 10 percent the company's EPS, according to Piper's estimates, while a 1.0 percent increase would add 18 percent to its EPS estimates for 2006.

"2006 should be a year of new Macs. Apple will likely talk about new Intel-based Macs at Macworld and we expect to see shipments in [first half of 2006]. We believe new Macs, especially portables, will lead to market share gains for Apple in 2006. Our current Mac unit estimate implies 2.4% worldwide Mac market share in during the year, which assumes no market share gain"

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