UBS bullish on Apple, raises target price to $54

To factor in higher margins and stronger sales of iPods and portables, the firm raised its June quarter earnings-per-share (EPS) estimate from 24 cents to 30 cents, and its fiscal year 2005 (FY05) estimate from $1.08 to $1.33.

UBS also boosted its FY06 EPS estimate from $1.30 to $1.60 to reflect a much higher operating margin of 12.1%, driven by lower expenses and higher revenues. The firm previously assumed an operating margin of 9.9%.

"While some may have expected higher iPod sales & higher guidance, we believe results are impressive in terms of margins & laptop sales," said analyst Ben Reitzes. "We also believe desktop sales in March were adversely impacted by anticipation of the Tiger OS set to ship in the June quarter. As a result, Mac sales could see a boost over the next several quarters from current levels."

To reflect its higher estimates, UBS raised its price target on Apple from $50 to $54, which it says is still based on EV/sales of slightly more than two times higher than Apple’s "pre-bubble" multiple but in line with many of its peers.

Details to follow.