Citi Ups Apple Estimates on Strong PC Sales

Citi (Richard Gardner) raises Apple (AAPL) 1CQ08 revenue and EPS estimates to $7 billion (from $6.9) and $1.23 (from $1.14) to reflect increased PC unit shipment expectations and 40% drop in DRAM pricing. Maintains Buy, but waffles on quarter stock call:

We now expect PC unit shipments of 2.1M (+38% yoy) versus our prior estimate of 2.0M and consensus of 2.06M, with upside coming from Mac Pro desktops and MacBook Air notebooks. We now expect iPod unit shipments of 9.5M versus our prior estimate of 10.0M and consensus of 10.5M; iPod should struggle until the line is refreshed in 3CQ.

We continue to expect iPhone unit shipments of 1.5M despite the impending 3G iPhone launch. grey-market sales of unlocked phones will represent a large percentage of sales again this qtr, but should moderate as Apple signs more int’l carriers in 3CQ and beyond.

We expect Apple to guide 2CQ revenue flattish sequentially, gross margin down sequentially, and EPS down sequentially, none of which should shock the Street. 2CQ predictability is lower than in 1CQ given lack of new products, channel inventory draw-down on existing products, more stable component pricings, and back-to-school promos beginning in June.

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