Another Day, Another Apple (AAPL) Upgrade

Again, I try not to post about Apple (AAPL) every day but yet another upgrade today with significant upward revisions to estimates so had to mention it.

Citigroup raised its price target from $160 to $185, but more importantly are the reasons why which we've touched on here numerous times.... "citing surprisingly strong computer sales, falling component prices and Apple's recent price cut for the iPhone, the company's first cell phone."

The analyst upped estimates of PC units up from 2M to 2.17M (remember TheStreet.com was saying PC units could surprise by even more, up to 400K units)

(wait, wasn't everyone in a panic about how the iPhone was a failure due to the $200 price cut just two weeks ago?) Amazing how views change when you step back and avoid the knee jerk reaction.

On to the exact numbers: "Citigroup analyst Richard Gardner said in a note to clients that he had raised his earnings-per-share estimates for Apple to $4.76 from $4.30 for 2008, and to $6.35 from $5.55 for 2009."

So 2008 has been raised by 10.7% and 2009 by 14.4% - as I have been saying as people come around to all the layers of revenue streams, better margins, better Mac sales, etc on top of the baselines numbers, earnings are only going to continue to rip higher. Just using this 1 analyst, Apple suddenly went from forward PE on 2008 from 34 to 31. Neither is cheap, but that's a pretty dramatic drop. And I still believe by the time we get to the end of 2008 an earnings of >$5.00 is not out of the question. Still too many moving parts to say for sure with impossible to determine gross margins that far out but directionally the trend is clear. Up. It is hard for a company of this size/scale to constantly have upside surprises but with so many initiatives out there for incremental revenue with positive gross margin effects, more surprises should be out there in the years ahead.

I've been adding to the fund's Apple position here and there in drips and drabs, most recently in the $143s. I'd be itching to add quite a bit more if the stock (and markets) would agree to pull back some here.... Apple is now up to 2.5% of the fund's holdings. The stock is now matching all time highs hit in late July 2007. Hopefully nothing interesting comes out tomorrow on this name so we can have an Apple-free day!

Long Apple in fund; no personal position