Morgan Stanley: Apple to trade higher in 2007

In a note to clients, analyst Rebecca Runkle said near-term product introductions and less exposure to any disruption from rival Microsoft's Vista operating system launch could help reduce seasonal risk to Apple shares.

"In the intermediate term, an expanding product portfolio, growing distribution engine and market share opportunities all keep us Overweight Apple with an increased priced target of $110," she wrote.

Runkle said proprietary supply-chain checks give her high conviction that Apple will launch its much anticipated iPhone device during the first half of 2007.

"We expect Steve Jobs to announce the iPhone at Macworld or early next year," she told clients. "To-date, we've found two models that began initial production this month — a 4-gig and 8-gig version with capacity plans to build up to 12 million total units in 2007.

The analyst told clients she is remaining conservative on iPhone, including in her current model expectations that the Cupertino, Calif.-based company will sell just 6 million units during the year.

Her new model raises earnings-per-share and revenue estimates for the 2007 calendar year to $3.13 and $28 billion (up from $22.7 billion and $2.58), reflecting expanding Mac market share, revenues from iPhone and iTV, and increasing software/perohpheral sales driven by an increase in Mac sales.