With Apple (AAPL) set to report quarterly earnings next Tuesday, analysts are dusting off their spreadsheets, taking a second look at the numbers, and making adjustments — mostly upward.

On Friday, it was Morgan Stanley and J.P. Morgan Securities' turn.

The J.P Morgan team, led by Mark Moskowitz, raised most of his Apple estimates, including

• Price target (to $167.50 from $155),
• Q3 earnings estimate (to $1.23 a share from $1.12)
• iPhone unit sales (to 4.34 million from 3.88 million)
• and Mac unit sales (2.50 million from 2.13 million)

Morgan Stanley's Huberty, whose sentiments about Apple tend to go hot and cold, made some even more dramatic adjustments.

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According to Morgan Stanley's Kathryn Huberty, Apple (AAPL) is the computer maker with the "most upside" as the PC market begins to stabilize after the dismal first quarter of 2009.

There's some good news for Hewlett Packard (HPQ) and Dell (DELL) in the report to clients Huberty issued overnight Wednesday, but it's mostly attributed to enterprise cycles and inventory restocking.

Apple, however, is a different story.

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Eight months ago, Morgan Stanley and RBC Capital both downgraded Apple (AAPL), triggering the company's worst selloff in eight years, a 23-point drop that lopped nearly $18 billion off its market cap.

RBC's Mike Abramsky reversed his position last month, raising his price target for Apple from $95 to $165.

On Tuesday Morgan Stanley's Kathryn Huberty followed suit, raising her target from $105 to $180 and sparking a rally that lifted Apple's stock price 8.28 points (6.67%), to close at $130.78 a share.

Like most Apple analysts, Huberty expects the company to introduce a new iPhone this summer and to cut its prices on existing models — and she makes a strong case that the resulting revenue spike will offset any slowdown in Apple's Mac and iPod business.

But the most interesting part of her report to clients is the fresh look she takes at the mobile Internet market — a market she describes as "one of the biggest opportunities in the history of the technology industry."

Among her findings:

• The iPhone has already dramatically changed the behavior of mobile device users
• Its ultimate target are the 4.1 billion people worldwide currently using cell phones
• The opportunity to connect those users to the Internet is arguably 40 times the opportunity to connect 100 million PCs to the Internet in the 1990s
• Apple is emerging as the "clear leader" in the race to get those users connected.

Accompanying her report are some particularly well-designed charts. Our favorite is the one that shows how Apple has changed user behavior:

The expanded slices in the upper left-hand quadrant of the pie chart correspond roughly with our own experience — without, of course, all that game playing.

See also:

• Why Apple's shares took a nosedive
• Mike Abramsky: Apple vs. RIM revisited

Money gets tight. Buyers get picky. Price-sensitive consumers — the kind Steve Jobs  and Apple famously "choose not to serve" — start shopping for bargain basement PCs and Taiwanese netbooks. Mac sales plummet.

That's the conventional wisdom. Or at least that's the line Morgan Stanley's Kathryn Huberty pitched in September — when she lowered Apple's (AAPL) rating twice in two weeks — and reiterated last week, when she earned the distinction of being the first and only mainstream Apple analyst to set a 2009 price target below $100 a share. (see here)

“PC unit growth is decelerating," she wrote in September, "and the remaining source of growth is increasingly in the sub-$1000 market where Apple does not play.”

The only trouble with this argument, as Turley Muller of Financial Alchemist points out, is that it flies in the face of Macintosh unit sales for the first 12 months of the recession.

"Huberty claims Apple is at risk because it’s highly exposed to the premium-end, where demand has been falling," Muller writes in an analysis posted Friday. "However, Mac unit sales grew nearly 40% for 2008, and its share in the premium segment almost doubled. Mac sales have been growing roughly 3x the market."

Huberty, whose Mac and iPhone estimates are among the worst in the industry, has become a favorite target for Apple enthusiasts. (See Why Apple shares took a nosedive.)

But Muller may be the first to put his finger on precisely what she's doing wrong.

"I understand why consumers aren’t paying-up for Windows PCs," he writes. "How are HP, Dell, Acer, Toshiba, etc different from each other if they all use Intel chips, run Windows, and have many other of the same components?"

And because the PC industry is so dominated by Windows PCs, the dynamics that drive demand for Microsoft (MSFT) Windows machines are going to determine what demand for the entire industry looks like.

But, as Muller points out,

"Macs and Windows PCs are not similar product offerings. Some analysts, notably Huberty, appear to conflate the two. Macs are Windows machines, for one can install Windows OS on Mac hardware and use it just as if it were a Dell or HP. But, PCs such as Dell and HP can’t run Mac OS."

"Therefore," he writes, "it’s Windows PC demand that is shifting to the lower-end" (emphasis his).

Muller's analysis suggests that Apple was right not to offer sharp Black Friday discounts and to stay out of the business of making $500 computers — the kind of "junk" Steve Jobs says Apple's DNA won't allow it to ship.

Even Muller concedes, however, that no company is immune to the effects of an economic downturn of this magnitude. He argues — as others have before — that once you've tasted the benefits of the Mac OS, it's hard to switch back. But with money tight, buyers may be less likely to explore the high-price offerings in the Apple Store.

"The recession won’t cause cheap Windows PCs to take sales away from Macs," he concludes. "Instead it will slow the rate that Macs take share from PCs."

Click here to read the rest of Muller's piece.

Apple shares suffered their sharpest fall in eight years Monday morning on the word of two analysts — including one whose record predicting the company's performance is mixed at best.

By 10:30 a.m ET the stock had dropped 16%, wiping out more than $18 billion in the company's market capitalization in the space of 60 minutes. Apple closed at 105.26, down nearly 18%, its lowest level since May 2007.

The broader market also fell at the opening bell, and then more sharply after the financial bailout plan failed to pass in the U.S. House of Representatives. By the end of the day the Dow Jones Industrial average had lost more than 777 points, its worst point loss in history, down nearly 7%.

But even that paled next to the nosedive Apple (AAPL) took after Morgan Stanley's Kathryn Huberty, citing slowing global consumer demand, cut her price target to $115 from $178 and her recommendation on Apple from "overweight" to "equal-weight." (see Apple bruised in downgrades)

In a survey of eight leading Apple analysts last September, Huberty was rated the "worst" based on her ability to estimate the company's quarterly sales (see chart at right). For fiscal Q2, for example, she predicted that Apple would sell only 1 million iPhones. Actual iPhone sales that quarter were 1.7 million. (see here)

The other analyst to downgrade Apple on Monday, Mike Abramsky of RBC Capital, has a considerably stronger track record. In fact, he is one of seven "star analysts" on Yahoo finance, based on the accuracy of his estimates of Apple's earnings per share over the past two years. His estimated EPS for fiscal Q2, however, was off by 4.5%.

On Monday Abramsky downgraded the stock to "sector perform" from "outperform" and cut his price target to $140 from $200, citing a survey that showed a sharp decline in the percentage of consumers who plan to buy a Mac in the next 90 days.

Investors at The Mac Observer's Apple Finance Board, who tend to be bullish on the stock, blamed the price collapse on short-sellers who dumped Apple shares even before news on the bailout vote came out.

Apple's fiscal year ended on Saturday, Sept. 27. The company is expected to easily beat its guidance numbers on the strength of record sales of iPhones and MacBook computers. See, for example, here.

UPDATE: In a note to clients issued Monday afternoon, Piper Jaffray's Gene Munster cited Huberty and Abramsky's downgrades as the primary reason for Apple's falloff, but downplayed their concerns. His bullet points:

1. Consumer is slowing, but Street models reflect the slowdown. Our FY08 Mac unit growth estimate is 40%, going to 16% in FY09. We expect Mac growth of 29% this quarter.
2. We believe margin pressure concerns will prove to be overblown. The Street is modeling for 32% gross margin in FY09, down from 34% in FY08. We expect margin guidance to be 30-31% for December, in line or above the company's 30% gross margin guidance for FY09.
3. A disappointing preannouncement for Sept. is unlikely. We do not believe Apple will preannounce a disappointing September quarter. Our analysis of two months of NPD data on Mac and iPod, which has a 0.90 correlation, suggests 5% upside to Street numbers.