Analyst: Apple Set for Strongest Quarters Ever

by , 8:25 AM EDT, April 26th, 2007

Apple beat analyst expectations with its March quarter financial reports and came in 38 percent above the Street's predicted EPS. Piper Jaffray's Gene Munster thinks that is only the beginning, and Apple is poised to report the best quarters in the company's history.

Mr. Munster commented "We believe Apple is entering what will be the three strongest quarters in the company's history with the following catalysts: 1) iPhone, 2) new product in Jun/Sep (video iPod, tablet Mac, or other new consumer product), and 3) continued Mac market share gains."

He also doesn't see any clear treat to Apple's core market of Macintosh and iPod. "Zune is a flop in the MP3 space," he said. "And Dell & HP have failed to deliver PCs that rival the Mac."

Mr. Munster added that Apple will likely maintain a massive lead in the portable audio market while growing its share of the personal computer market, too.

Apple's gross margin will also likely stabilize about 30 percent for the next few quarters thanks to favorable component pricing. Although the company is guiding conservatively for the next quarter, it will probably come in above to bring it in line with analyst estimates.

"Apple typically guides conservatively, either at or below Street consensus. But the company has also made a habit of beating its conservative guidance," he said.

Mr. Munster is rating Apple as "Outperform," and is raising his target price from $123 to $140 based on a projected $3.50 EPS for 2007, up from an EPS of $3.08.

Apple is currently trading in the pre-market at $102.67, up 7.322 (7.68%).

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