Apple (NASDAQ:AAPL): Credit Suisse raises target to $300, calls for a Monster quarter

Credit Suisse is making a major call on Apple (NASDAQ:AAPL) raising their target to $300 (prev. $275) and reiterates Outperform rating. The firm is calling for a Monster quarter...

As we approach the end of Apple’s March quarter, CSFB believes it is now clear the company is running well ahead of our previous expectations and consensus, and they are raising estimates as a result. While upside is often the norm for Apple, the firm notes they are still surprised by the current strength as they believe Apple is now running well ahead of expectations in all of its key business segments during what is typically a seasonally “sloppy” quarter. Overall, they are increasing their March quarter revenue and EPS estimates to $12.26 billion and $2.57 from $11.45 billion and $2.27, respectively. To put this in perspective, the March quarter typically represents Apple’s seasonal nadir, and their estimates would imply the March quarter of 2010 would be the second strongest quarter in company history (including seasonally strong December quarters). In addition, this upside flows into firm's full year forecast. They are now looking for fiscal 2010 revenues and EPS of $56.49 billion and $12.53 versus their previous $54.4 billion and $11.83, respectively. On a calendar basis, they expect respective revenues and EPS of $59.43 billion and $13.23 for 2010. For fiscal 2011, the firm is now looking for respective revenues and EPS of $65.34 billion and $14.55, versus $62.31 billion and $13.64 previously. For calendar 2011, they are now expecting revenues and EPS of $66.32 billion and $14.72, respectively. Firm notes the following key takeaways from their revisions:

iPad: The Good News Starts Streaming In
The iPad isn’t out yet, but CSFB feels comfortable removing some conservatism from the model. When the iPad was launched they introduced a fairly conservative unit forecast for the device, but they noted their high-40s gross margin estimate was higher than most of their peers were modeling. Their gross margin estimates remain essentially unchanged, but solid pre-order momentum is pushing them to increase their unit forecast. For the June quarter, the firm is now looking for 1.08 million units versus 650 thousand previously. For calendar 2010 they are now looking for 4.81 million units, versus their previous forecast for 3.93 million units. For calendar 2011, they are looking for 8.73 million units, versus 7.9 million previously.

iPhone: International Expansion Is the Key Driver
International momentum for the iPhone is likely to drive upside. While CSFB believes the iPhone continues to perform well in the United States, they believe much of the incremental share gains and upside will come from international markets in the March quarter and throughout 2010. They are raising their March quarter iPhone unit estimate to 7.41 million units, from 6.54 million previously. For calendar 2010, they are now looking for 40.65 million units, versus 39.11 million units previously. And for calendar 2011, the firm is now looking for 52.36 million units, up from 50.18 million units previously.

Macs: Hefty Share Gains to Continue
CSFB's Mac estimates were already optimistic, so they are making only modest revisions today. Recent data from NPD suggest that Mac units grew by 38.3% in the U.S. retail segment for the first two months of the year.

iPod: The “Forgotten Segment” Is Surprisingly Robust
CSFB notes very little investor focus on the iPod segment, as many have already assumed this business is facing irreversible secular decline. Indeed, this has been their line of thinking as well, particularly with the likely long-term cannibalization from the iPhone and iPad business segments. Nevertheless, the App Store continues to breathe new life into this category, and into the Touch product family in particular. Indeed, NPD data suggest that iPod units grew by an average rate of 4.9% in January and February, whereas they had been forecasting a 15.4% decline for the full quarter. As such, they are raising their March quarter iPod estimates to 11.0 million units, from 9.32 million units previously.

The firm notes they are now 8.9% ahead of consensus EPS for the quarter and 7.5% ahead of fiscal 2010 consensus. We suspect consensus expectations will trend upward in coming weeks, but Apple still has plenty of room for a sharp upside surprise when it reports results next month. In their view, this surprising momentum in fundamentals and the potential for a very successful iPad launch next week bode well for the stock’s near-term momentum. Apple is currently trading at 17.1 times CSFB calendar 2010 EPS estimate, and ex-cash (assuming a 3% interest rate) the multiple stands at 15.1 times. This compares favorably to the historical five year average of 24.7 times.

Notablecalls: So this is the first tier-1 firm to institute a $300 target for Apple (Pacific Crest, or whatever it's called these days put out a report with a similar target back in Jan but who cares about Pacs, right).

CSFB is calling for a monster quarter which should lead to strong buy interest in the name.

Note that J.P. Morgan is upgrading Research in Motion (NASDAQ:RIMM) this morning (to OW, 84tgt) with Merrill Lynch/BAM & RBC calling for a strong quarter. This should add fuel to the fire. Hell, even Nokia (NYSE:NOK) gets an upgrade from JPM this morning. The whole mobile internet space is red-hot.

I suspect AAPL will take out its $231 high today with $233-234 levels not out of question if the market plays ball.

It's quarter end, remember.