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Wednesday, July 22, 2009, 10:35 am PT (01:35 pm ET)

Wall Street again has high hopes for Apple after record quarter

Analysts are again bullish on Apple stock after the company reported a record third quarter in Tuesday's earnings report, and provided higher-than-expected guidance in some aspects of its fourth quarter.

Though Apple is well known for giving investors conservative guidance for the coming quarter, many analysts were surprised by Apple's third-quarter guidance of 34 percent gross margin and $1.18 to $1.23 in earnings per share. Those totals were better than market expectations prior to Tuesday's earnings announcement.

Here is a breakdown of analyst ratings and price target changes, as well as excerpts from their commentary:

Piper Jaffray: Overweight ($186)

Analyst Gene Munster, with Piper Jaffray, said the fact that Apple can't make enough iPhones to meet demand is a good sign of things to come. He expects the accelerated sales of iPhones and Macs that began in the June quarter to continue. Munster is even more optimistic because Apple's guidance for the coming September quarter is less conservative than usual.

Munster also noted that Apple COO Tim Cook, during his comments on Tuesday's earnings conference call, left the door open for a large touch-screen device, but essentially ruled out the possibility of an Apple-branded netbook. The comments led Munster to believe that a tablet device will debut later this year or early next year. In addition, the analyst expects to see new iPods and an update to the Apple TV that could include DVR functionality.

"We maintain our Overweight rating on shares of AAPL," he wrote. "Raising price target from $180 to $186 to reflect higher EPS estimate on an unchanged multiple."

Caris & Company: Buy ($200)

Rob Cihra, with Caris & Company, sees the iPod touch as the "growing ace up Apple's sleeve." Although iPods were comparatively the weakest producer for the third quarter, the inclusion of the App Store with the iPod touch makes it stand out from other MP3 players on the market.

"We continue to believe Apple’s Touch keeps stealthily growing within mix and can exceed 10% of total revs," Cihra wrote. " A UNIQUE product angle competitors can’t match (iPhone apps WITHOUT monthly service fee), iPod Touch becomes more than a music/video player but gaming device, etc., with video camera a likely addition in next (fall?) refresh."

Citi: Buy ($196)

Analyst Richard Gardner also cited Apple's positive guidance, above market expectations, from Tuesday's earnings report. He also viewed the company's pre-buying of $500 million in NAND flash memory as a positive.

"Mac, iPods and iPhone shipments were all meaningfully above our forecast, while EPS of $1.35 beat our estimate by $0.22 primarily on material gross margin upside," Gardner wrote. "We remain bullish on AAPL shares."

Needham & Co.: Strong Buy ($200)

Charlie Wolf has high expectations for AAPL stock after it "once again defied the recession" in the third quarter. But the analyst with Needham & Co. still has reservations about the future of the App Store. During Tuesday's conference call, the analyst told Apple executive Tim Cook he believes developers are currently in a "race to the bottom" with $0.99 apps.

"If the App Store is going to drive iPhone sales, the applications on the web site have to be unique and valuable to shoppers in ways that can’t be matched on competing smartphone stores," he wrote. "In short, they should populate the 'killer app' category, which has been a key driver of hardware sales. To accomplish this will require that the most engaging applications are written for and can be easily discovered on the iPhone App Store."

RBC Capital Markets: Outperform ($190)

RBC's Mike Abramsky sees pending distribution of the iPhone 3GS in more overseas markets as a "catalyst to momentum." Particularly, the pending launch of the iPhone in China is seen as a huge opportunity for growth.

"Apple is expected to expand distribution of the iPhone 3GS to 80+ countries in Q4, up from 14 countries in Q3," Abramsky wrote. "We believe Apple may move away from carrier exclusivity agreements and launch additional carriers, possibly in the UK and other countries; nonexclusive distribution and increased competition are expected to increase iPhone demand and sales in those countries. The price cut of the iPhone 3G 8GB to $99 is expected to stimulate sales in more price-sensitive developing markets (e.g., Asia-Pacific, Latin America, Eastern Europe)."

Morgan Stanley: Overweight ($195)

Though analyst Kathryn Huberty originally thought the lack of a sub-$700 netbook would hurt Apple, she said Tuesday's earnings report was enough to alleviate those concerns for her. In addition, high margin iPhone sales and prepayment of flash memory de-emphasized long-term gross margin guidance of about 30 percent.

"With these risks muted," Huberty wrote, "iPhone sales > supply, and Mac unit upside, we see a high likelihood of the stock approaching our new $195 price target by calendar year-end."

Analyst breakdown


UBS Investment Research: Neutral ($160)

Unlike most other analysts, Maynard J. Um is not as bullish on AAPL stock. The UBS report raised the target price for Apple to $160, from $140, but expressed concern that increased component costs, particularly on LCD panels, could hurt the company's bottom line.

"We maintain our Neutral rating," Um wrote, "though note that new product announcement (such as a new Verizon Wireless notebook or new iPods) could help boost sentiment."

Kaufman Bros.: Buy ($184)

Kaufman Bros. analyst Shaw Wu had cautioned that Apple could disappoint with the market's high expectations, but he noted in his report that "Apple was able to beat regardless."

We find this particularly impressive in light of high expectations and continued difficult macroeconomic conditions," Wu wrote. "We had cautioned that AAPL shares could consolidate near term given its significant outperformance and universal expectation of a sizable beat; however Apple was able to exceed even the most optimistic expectations."

Barclays Capital: Overweight ($188)

Ben A. Reitzes retained Apple's overweight rating, stating the stock did not disappoint. Though many on Wall Street were concerned the company would lower gross margin forecasts long-term, Apple did not. Reitzes also expects Apple to introduce new hardware in Q4.

"We look forward to even more new products again this quarter," he wrote, "including Snow Leopard software, additional iPhone 3GS international rollouts and new iPods which should come by fall."