Rumours of a flash iPod, and belief that the iPod is translating into Mac sales, caused Apple's stock to close at $65.78 last night (December 6), $3.10 – almost five per cent – higher than its previous level. Earlier in the session the stock rose as high as $66.24.

The stock closed at $68.44 on November 29, that day the stock soared to $69.57. However, in recent days the stock price had started to decline. JP Morgan analyst Bill Shope suggested that the pressure last week might have been a result of some competitor downgrades and profit taking from the stock's gains throughout the year. In the last year Apple's shares have climbed more than 60 per cent.

The reason for yesterday's turn around was the actions of several analysts who raised their earnings estimates for the company on expectations for strong sales of its computers and the iPod digital music players.

In a flash

JP Morgan Chase analyst Bill Shope raised Apple's sales and earnings estimates citing "holiday strength", and "expectations for a new flash-based iPod, and accelerating Mac share gains," according to CBS MarketWatch.

He added: "While we believe concerns over Apple's valuation are certainly understandable given the stock's rapid rise, we believe expectations for the company's revenue and profit growth may still prove conservative."


Shope expects 2005 earnings of $1.69 a share on sales of $12.92 billion. Previously he estimated $1.48 and $11.4 billion, respectively.

First Albany's Joel Wagonfeld also increased his estimates for the company and increased his price target to $72 from $61 previously. He said: "Although expectations are clearly very high at this point, we believe the stock could advance further."

Bear Stearns analyst Andrew Neff raised his share price target on Apple to $72 from $60, based on rumours of a flash memory iPod digital music player and the potential of the iPod to draw in new Mac customers.

Thomas Weisel analyst Kevin Hunt also upped his earnings forecast for Apple. But he downgraded the stock, to peer perform from outperform and placing a $59 price target on the stock.

According to Hunt said: "The long-term story remains positive for Apple ... as consumer spending in the electronics space ... is rapidly accelerating and Apple is clearly a key player at the center of this trend. Why downgrade? The answer is that we believe that at the current valuation, the good times ahead are already priced into the stock."