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Thursday, November 02, 2006, 06:20 am PT (09:20 am ET)

Apple's shares seen rising higher ahead of Macworld 2007

While shares of Apple Computer have appreciated significantly over the last several months, one analyst says the company's stock still holds potential for 'sizable' gains ahead of MacWorld Expo in January 2007.

In a research note released to clients on Thursday, American Technology Research analyst Shaw Wu said both Mac and iPod momentum are reflecting continued strengthen into the holiday shopping period, up from the robust levels witnessed during the company's record-setting September quarter.

According to Wu, Apple's MacBook notebooks continues to be the top selling Mac due to its excellent value and solid feature. At the same time, sales of the MacBook Pro line are once again said to be on the up-and-up as a result of recent upgrades to Intel's Core 2 Duo processors.

Meanwhile, the analyst said fifth-generation iPod video sales remain strong, helped in part by Apple's aggressive pricing, including its high-end $349 80GB model.

"We believe improved video battery life, higher video resolution, movie content, and video games are helping drive sales," Wu told clients. "Nanos continue to rebound helped by lower price points, 24-hour battery life, multiple colors, and scratch-resistant casing."

Wu's sources also indicate that the new entry-level $79 iPod shuffle has received 'very strong' orders from Apple direct customers as well as third-party retailers such as Best Buy, Circuit City, and CompUSA. "We continue to believe this dark horse could end up being the top selling iPod and gain significant share against flash competitors," he said.

While it is still early in the quarter, Wu said he feels comfortable with his holiday quarter forecast of $6.1 billion in revenue and $0.72 in earnings-per-share versus Apple's guidance of $6.0-6.2 billion and $0.70-0.73. He's modeling the company to sell 14 million iPods and 1.8 million Macs during the quarter.

"We see several catalysts over the next few quarters including: Mac OS X Leopard in [the first half of 2007] that will help maintain strong Mac momentum, iTV launch in [the first quarter of 2007], movie content partners beyond Disney, new iPod features including widescreen and wireless Bluetooth capability, and cell phones sometime in 2007," the analyst said. "We reiterate our Buy rating and would take advantage of recent weakness to add to positions."

Wu maintains a $92 price target on shares of Apple.