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Wednesday, December 30, 2009, 08:00 am PT (11:00 am ET)

Kaufman Bros ups Apple target on expectations of "blowout" Q1

Strength in all of Apple's core business segments during the December quarter is likely to see the company breeze past already heightened expectations on Wall Street, investment bank Kaufman Bros. said Wednesday.

"Despite continued difficult macroeconomic conditions and ever rising investor expectations, we anticipate Apple could still post material upside to recently raised consensus estimates, not to mention its conservative guidance, driven by strength in all three major product lines, particularly its iPhone business," analyst Shaw Wu wrote in a note to clients.

More specifically, Wu said Apple could ship a record high 9.5 million iPhones during the three-month period ending December, given information from his sources that indicate strong momentum in the U.S., a more material contribution from Asia-Pacific (China and Korea); and a stronger-than-expected uptake in Europe due to multiple carriers and more attractive prepaid service plans.

That would put Apple close to Research in Motion, which moved 10.1 million BlackBerries during its recently-ended November quarter, and best its own quarterly sales record of 7.4 million units, which was set last quarter. On average, Wall Street is expecting the Cupertino-based company to report sales of 8.8 million units, while some individual analysts have made predictions as high as 11 million units.

Meanwhile, Wu also sees continued momentum in Apple's Mac business, driven by new widescreen iMacs and MacBooks. However, he took pause in his note to clients to express concern that supply constraints on LED flat panel displays could limit upside potential, as Apple has been unable to fill all of its pre-holiday orders, particularly 27-inch iMacs.

"We are leaving our forecast at 2.9 million Macs (consensus at 2.85 million). For iPods, we remain comfortable with our aggressive forecast of 22 million units (consensus at 20 million)," he wrote. "Our sources indicate continued iPod touch momentum driven by the iTunes App Store and strong uptake in its new iPod nano with built-in video camera."

Wu reiterated his Buy rating on shares of Apple, raising his price target to $253 from $235. For the December quarter, he's forecasting Apple to earn $2.15 per share on sales of $12.4 billion, compared to management's guidance of $1.70-$1.78 per share on sales of $11.3 billion-$11.6 billion. As a whole, Wall Street is at $2.04 per share on sales of $11.9 billion.