UBS: Buy into Apple ahead of Macworld

"We believe that Apple has many exciting new products in the pipeline with many set to hit in the first half of calendar year 2007," analyst Ben Reitzes told clients in a research note following the company's impressive fourth quarter earnings report on Wednesday.

The analyst said he continues to expect new video iPods with bigger screens as well as additional content deals for films on iTunes in the coming months, but does not see a new video iPod until early 2007 after Macworld.

"Apple’s iTV digital media hub previewed at its recent 'Showtime' event in mid-September is expected to hit shelves by calendar 1Q07, and we could learn about more exciting features for this product at Macworld in January (and more media hub products and services), " he wrote.

"We remain confident Apple is working hard on innovating in the digital home and seems to still be a step ahead of the competition."

Reitzes on Thursday raised his fiscal year 2007 estimate for the company to $23.2 billion in revenue and $2.75 earnings-per-share (EPS) from $23.1 billion and $2.70, to reflect higher Mac and iPod unit sales.

"While there were concerns over potential for weak iPod sales throughout the quarter, we were extremely surprised at iPod strength during fiscal [fourth quarter]," the analyst wrote. "Also, Mac unit sales of 1.61 million (up 30 percent year-over-year and up 21 percent sequentially) beat our optimistic estimates of 1.48 million units."

For fiscal 2008, Reitzes is now modeling Apple to earn $3.15 per share on revenues of $26.7 billion, up from $3.10 and $26.4 billion.

"We are reiterating our Buy 2 rating ahead of the January 8th Macworld Keynote address by Steve Jobs," he told clients.