iPad 2 sales rebound expected to show Apple stock still has 'gas in the tank'

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J.P. Morgan analyst Mark Moskowitz told investors Tuesday that shares of Apple stock remain a strong buy with "plenty of gas in the tank" for upward movement, in spite of recent volatility.

In a note to clients early Tuesday, Moskowitz said he expects Apple to beat both his estimates and the Wall Street consensus when it reports its third quarter of fiscal 2011 results next week. He attributed the stock's recent fluctuations to the change in investor expectations as a result of "iPhone 5 vs. iPhone 4-plus soothsaying and the speculation over iPad 2 shortages."

According to the analyst, concerns of shortages are "overdone," as the firm's research indicates that "most Apple stores are fully sourced." He also pointed to the recent shift in Apple's lead times for the iPad 2 from 1-2 weeks to 3-5 days as evidence that the company's supply woes have improved.

The firm's iPhone estimate for the June quarter stands at 17.5 million units, though Moskowitz suggests there is upside potential to the prediction. The analyst sees Apple selling 6.7 million iPads in the most recent quarter, also with upside potential. Finally, he notes that his Mac estimate of 3.9 million units may also be on the low end. Apple may also post better than expected results given the improved "component cost environment," excepting Hard Disk Drives.

Moskowitz and his colleagues believe Apple will release an "iPhone 4-plus" in August or September, holding off on the so-called iPhone 5 until 2012. They also agree with recent evidence of an upcoming refresh to the MacBook Air line and suggested that the new ultra-portable Macs will see a price cut.

J.P. Morgan sees recent downtrends as bottoming out relatively soon, while noting that Apple is expected to remain a "top pick" for offsetting "low expectations and macroeconomic issues." The analyst attributes recent weakness among technology stocks to "the Japanese supply chain disruption and rising commodity cost." After a large earthquake and tsunami struck Japan earlier this year, some suppliers and component manufacturers were affected, though Apple has said the disaster did not have a meaningfully impact iPad 2 production.

"Our view is that these negative factors have partially faded, which could lead to improving global production activity," Moskowitz wrote. He believes that investors will soon regain confidence in technology stocks, which will pick back up as issues decline.

Shares of Apple fell 1.59 percent to $354.00 on Monday. The stock has bounced back from a year-to-date low of $315.32 on June 20.