Goldman bumps Apple from Conviction Buy list

"We are removing Apple from our Conviction Buy list but leaving it as a Buy," explained analyst David Bailey. "We continue to view Apple as a stock that should be bought on dips over the next 3-4 months during the anticipation period in front of iPhone."

Since Goldman added Apple to its Conviction Buy list on September 8 2006, the stock has been up 18.8 percent versus the S&P 500's 11.6 percent. But Bailey said the next few months leave the company vulnerable to negative sentiment, making shares of Hewlett-Packard slightly more attractive.

"The major risk to Apple," Bailey wrote in a note to clients, "is that it is a high expectations, high beta company that has to get through the next 3 months — which also happens to coincide with what is often one of tech's weaker quarters — without a specific catalyst."

At the same time, the analyst noted that speculation about the strength of Mac sales and initial iPhone orders could pop up occasionally, leading to a "somewhat nosier" March quarter.

"Despite iPhone's presumed June shipment date, we see it as breaking enough new ground to enable Apple's growth to continue at or above-20 percent levels, biased still to the upside," he wrote. "In fact, our preliminary base case analysis, assuming 25 percent video iPod cannibalization in calendar 2007 and 50 percent in 2008, concludes that iPhone alone could add an incremental [4 to 5 percent] to Apple's revenue growth in those two years."

Bailey maintained his 12-month price target of $110 on shares of Apple, explaining that as a growth company, he bases valuation of price-earnings ratio, growth-adjusted earnings multiples, cash flow metrics and discounted cash flow.