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iPod touch seen as small but stealthy asset in Apple lineup

Though iPod sales are predicted to be the weakest-performing segment of Apple's overall sales this quarter, the iPod touch is said to be the ace up the company's sleeve, thanks to the platform's compatibility with the App Store.

Advancing next Tuesday's earnings report from Apple, Caris & Company released an analysis Friday that predicts the iPod touch will grow toward 10 percent of the company's revenues.

"No longer just a music/video player, iPod Touch is increasingly a gaming device, etc., with video camera a likely addition in next (fall?) refresh," the Caris report reads. "We believe iPod Touch sales have been ramping all year, representing an estimated 18% of iPod units since Sep-07 launch."

Even though the iPod lineup is not expected to have grown in terms of sales this past quarter, analysts still have high hopes for AAPL stock. Both Caris and J.P. Morgan have raised their target prices for the publicly traded company and recommend that investors buy. Both firms anticipate the company will report tremendous growth in both iPhone and Mac sales.

J.P Morgan had initially set a target price for AAPL of $155, but upped that this week to $167.50. The stock closed Thursday at $147.52. The firm said input from "industry contacts" suggests 2.5 million Macs were sold in the quarter, along with 4.34 million iPhones.

The J.P. Morgan report views the iPod touch as Apple's netbook, of sorts. At least, the analysis says, until Apple officially enters the netbook market – something the firm expects the Mac maker to do.

"We think the iPod touch provides the portability, Internet browsing, and email features that are the hallmark of the netbook PC experience," the report states. "With the iPod touch, the main limitation is the small screen size relative to netbooks. While we continue to believe that Apple will introduce its own netbook-like device, in the interim, the iPod touch should help the company benefit from the latest computing trend related to the netbook."

Meanwhile, Caris has set a price point of $170 per share for AAPL. The company expects Apple to continue to grow through the September quarter, bolstered by the $99 iPhone 3G and price cuts in the MacBook lineup.

Caris chart

"We see Apple’s iPhone and Mac sustaining considerable headroom for growth via market share gains, with its iPhone/App Store shaking up the entire billion-unit cell phone industry," the Caris report reads.