Wells Fargo Raises Estimates on Apple (AAPL) Ahead of Earnings, Sees Appleonians Waiting for iPhone 4S

Wells Fargo is reaffirming its Outperform rating and $460-$480 valuation range on shares of Apple (NASDAQ: AAPL) ahead of its fourth quarter results.

For the fourth quarter, the firm forecasts 21 million iPhones sold, 11 million iPads, 7.5 million iPods, and 4.2 million macs. Wells Fargo notes that its iPhone assumption is conservative on a belief that consumers were awaiting the release of the new iPhone 5, which was actually the iPhone 4S.

Due to lower than previously expected component costs, Wells Fargo raised its gross margin estimate from 38 percent to 39.7 percent for the quarter. The firm also raised its EPS estimate for the fourth quarter from $6.60 to $7.15 while maintaining its sales estimate of $29.4 billion.

For fiscal 2011 and 2012, Wells is raising its EPS estimates from $27.23 and $31.15 to $27.78 and $33.40. The increase in its fiscal 2012 estimate reflects the overwhelmingly positive response to the iPhone 4S. The firm's revenue estimate for fiscal 2012 was also lifted from $129.9 billion to $136.7 billion.

An analyst at Wells Fargo comments, "While Apple has been a relative outperformer this year, up 20% versus -5% for the S&P 500, we believe that the current PE multiple does not fully reflect the company's continued growth opportunities, and its propensity for revenue and earnings outperformance."

For more ratings news on Apple click here and for the rating history of Apple click here.

Shares of Apple closed at $400.29 yesterday.

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