Citigroup is raising their estimates on Apple (NASDAQ:AAPL) to a new Street high. Firm now expects $7.0B revenue (prev $6.9B, consensus $6.95B), 36.5% GM (35.2%, ~33.5%), and EPS of $1.23 (prev $1.14, consensus $1.06). New 1CQ08 rev and EPS ests reflect solid PC sales and, more importantly, sharp ~40% declines in DRAM/flash pricing.
Citi now expects 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. They now expect iPod unit shipments of 9.5M versus prior estimate of 10.0M and consensus of 10.5M; iPod should struggle until the line is refreshed in 3CQ.
They continue to expect iPhone unit shipments of 1.5M despite the impending 3G iPhone launch.
Citi expects Apple to guide 2CQ revenue flattish sequentially, gross margin down sequentially, and EPS down sequentially, none of which should shock the Street.
Reiterates Buy and $212 target. AAPL remains their Top Pick.
Notablecalls: Note that Citi's $1.23 EPS estimate is the new Street high. That's a pretty bold move by Mr. Gardner. Should drive at least 2-3 points of upside in the stock early on.