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iPod to Drive Apple Earnings Growth

Forbes reports, Goldman Sachs research analyst David C. Bailey maintained an "in-line" rating on Apple Computer but raised earnings estimates for the company, expecting holiday iPod demand and anticipation of upcoming product announcements to continue to drive earnings growth into 2006.

"2006 will undoubtedly mark another major year in Apple's transformation, but its new markets bring together tougher competition," wrote the analyst in a recent research note. "If early indications from suppliers prove correct, Apple is likely to move further from its Mac core in 2006, leveraging its brand and building on the consumer success of iPod."

Apple shares continue to significantly outpace the market, up 40 percent since the company reported earnings in mid-October. While Bailey would not recommend the stock as more than "a trade into MacWorld" at current levels, he said he would reassess his valuation if Apple announced new products over the next few months that could shift its center of gravity further into the consumer electronics realm.

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