24/7 Wall St. 2007 Price Target: Apple, $65

Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high.

Apple (AAPL). Apple has more going against it that for it in 2007. While Mac computer sales may pick up, it is likely that iPod sales will slow. As one analyst wrote recently: "We believe Apple needs to find new areas of growth," wrote Caris & Co. analyst Shebly Seyrafi.Growth of MP3 players may be as low as 10% next year.

Partially offsetting a possible slowdown in iPod shipments is the success of the MacIntosh. Apple sold 1.3 million Macs in Q3 06 which was up 12% over the same period the year before. It sold 1.6 million Macs in its fiscal Q4 06, an increase of 30%. But, the release of Microsoft Vista could boost PC sales and cut into the pool of people who may be crossing over to the Apple computer. If so, Apple would be dealing with slower growth for both of its core products.

To offset product growth rate problems, Apple could launch a hybrid cell phone/MP3 player iPhone as early as this month. Analysts think Apple could product 16 million iPhones in the first 2 to 6 months after launch. The company may also launch its iTV streaming media device shortly.

But, the iPhone may not be the iPod. There are already a large number of handsets on the market that play both music and video. The competition that the iPhone faces comes from already entrenched hardware and delivery networks.

A second potential strike on Apple’s shares this year is the government options probe. Steve Jobs has been cleared by his board, but that does not guarantee that the Justice Department or SEC will see it the same way.

Factors that could push stock above forecast: Apple’s revenue for the fourth calendar quarter of 2006 could be stronger than expected. If Mac sales do not seem to be affected by the Vista launch, Apple shareholders would breath a sigh of relief. Big sales for the iPhone early after its release could almost certain drive the stock up sharply.

Factors that could push the stock below forecast: The SEC could announced a formal investigation into Apple’s options dating. Should iPhone sales be anything other than spectacular, the share price will be pressured.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.