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December 13, 2006

Recent Apple News

Lots of Apple Computer (AAPL) news today. UBS is out with a note claiming that Apple will enter the wireless via a mobile virtual network operator (MVNO). UBS Telecom analyst John Hodulik was discussing this in the hallways of their conference last week but went public with his thoughts today. Given a loyal Mac user base and the built-in distribution system of Apple Store's, I think that this MVNO stands a better chance of success than others that have generally underperformed expectations in the U.S. market. I think the parallel here is Virgin Mobile in the U.K., not ESPNMobile in the U.S. While this news, if accurate, will give a small boost to Apple due to recent concerns that the launch of the iPhone would be delayed, a greater impact might be on the major wireless operators in the U.S. Hodulik notes that Apple would be entering the high-end market with an unsubsidized handset, and he believes that Sprint Nextel (S) with its high data usage is most vulnerable....

Separately, Morgan Stanley sharply raised its 2007 and 2008 earnings estimates for Apple due to an "expanding product portfolio, growing distribution engine and market share opportunities." Morgan Stanley also raised its target on Apple from $90 to $110.

I remain very bullish on Apple as it is one of the only large-cap stocks that offer 20% earnings growth over the next few years. I used yesterday's weakness related to an odd report claiming that iTunes sales were collapsing to add Apple to several new accounts. I continue to own the shares across the entire Northlake client base and in my personal accounts. I think the shares could reach new highs over $100 in the run-up to MacWorld in January. My current trading strategy might lead me to again trim positions in Apple at that time if my forecast proves accurate.

Posted by Steve Birenberg at December 13, 2006 01:58 PM in AAPL