In a note to clients issued Wednesday morning, Kaufman Bros.'s Shaw Wu reported on some interesting trends from his latest iPhone supply chain checks:

• Expensive iPhones — especially the $299 3GS — are doing better than expected in a tough macroeconomic climate. "Customers," he writes, "have surprisingly opted for higher-end models where they are willing to pay a premium for a faster processor, video recording, more storage, voice control, and other features."
• Apple, expecting a rush on its $99 3G iPhones, underestimated demand for the $199 and $299 models. As a result, there were widespread shortages of nearly all 3GS iPhones through the first weeks of July.
• "This is an interesting and arguably counter-economic trend," he writes, one that should lead to much higher profitability  — perhaps as high as 1,000 basis points.
• Apple has adjusted its production mix and supplies are improving. Wu is currently modeling 6.8 million iPhones for Q4 — nearly equal to Apple's runaway fourth quarter last year (6.89 million iPhones) and up 31% from Q3 (5.21 million). It's a forecast,  he says, that could prove to be conservative.
• He is picking up signs that Apple's suppliers could be gearing up to build 9 million to 10 million units.

Wu recently raised his price target to $184 a share — from $176 — based on 15 times his estimate of Apple's 2010 free cash flow plus net cash holdings worth $34 billion.

Apple shares were down a fraction of point to $159.73 in midday trading Wednesday.

Less than three weeks after sounding a bearish note on Apple (AAPL) by dropping the stock from his firm's "Focus List," Kaufman Bros. analyst Shaw Wu turned around Monday and raised his price target to $152 a share, up from $120.

With Apple scheduled to release its fiscal Q2 earnings report on April 22, many analysts are taking another look at the stock — and most seem to like what they see.

Last week, Barclays Capital’s Ben Reitzes also raised his price target 26% — to $143 from $113. His move followed Credit Suisse's Bill Shope, who rated Apple "outperform" with a target price of $133; and Canaccord Adams' Peter Misek, who called the stock a "speculative buy" with a $143 target.

[UPDATE: Caris & Co.'s Robert Cihra also raised his price target Monday, to $150 from $120; he thinks the iPhone and the App Store may still be under appreciated by investors.]

In his report to clients, Wu argues that even though Apple has outperformed the indexes — up 45% since late November vs. 20% for the NASDAQ and 7% for the S&P 500 — there is room for upside growth. As investors gain confidence, he writes, Apple shares may move closer to their traditional multiples of 20 to 25 times earnings.

Wu cites several near-term "catalysts" to justify his optimism:

• The World Wide Developers Conference in June, where he expects Apple to release the new iPhone operating system (OS 3.0) and to unveil new iPhone hardware (presumably for release later this summer)
• Improving sales of Apple's flagship computer line, thanks to the recent refresh of its desktop machines (iMac, Mac mini, and Mac Pro) and the upcoming launch of Snow Leopard, the latest major revision of Mac OS X.
• A wild card: "The potential for a new form factor, perhaps Apple's answer to the netbook, with a large screen iPod touch-Mac hybrid."

Wu also issued something rare for an analyst: a mea culpa (albeit one couched in "arguablies"). Referring to his March 24 report on Apple, he writes:

"We had arguably been a bit defensive with the stock over $107, taking it off our Focus List given we are arguably still in a bear market and investors not willing to pay more than 15x for quality hardware names. However, it appears that investor sentiment has turned a bit more constructive and willing to pay for quality names as we have seen with Apple, Research in Motion, Google, and Amazon."

See also:

• Barclays raises its Apple target 26%
• Apple Q1 earnings: Analyzing the analysts

Adding his voice to the drumbeat of speculation about Apple's (AAPL) future iPhone plans, Kaufman Bros.' Shaw Wu weighed in early Wednesday with a new report from his supply chain and industry sources.

Among his findings:

• Two out of three. Wu had heard that there are three new iPhones in the works, but based on clues that developers are finding in the beta iPhone 3.0 software, he now believes "only two will see the light of day."
• iPhone Sr. and iPhone Jr. Wu hears that one of the new iPhones will have longer battery life and a much more powerful processor capable of running more complex apps. The other would be a less-powerful "junior" iPhone.
• Millions of iPhones. Wu's sources indicate a "build plan" for the new models in the 5 million to 6 million unit range, considerably higher than his current 4.5 million estimate for the September quarter (fiscal Q4).
• Timing is critical. Wu is still not sure whether the new iPhones will ship in June or July. If the latter, the June quarter could be a tough one for Apple. Wu was expecting Apple to sell 3.2 million iPhones in the March quarter (fQ2) and 3.7 million in the June quarter (fQ3). But all bets are off if the new iPhones don't arrive until late June or July, and customers who were thinking about buying the current model hold out for the new ones.
• AT&T may cave. Wu's sources indicate a "high likelihood" that AT&T (T) will come out with more flexible "tiered" data plans to replace the one-size-fits-all $30 a month unlimited plan that has run into resistance among newly price-conscious consumers.

Although Wu maintains a "buy" rating on Apple with a $120 price target, he pulled it off Kaufman's special "focus list" last month as its share price began to close in on his target. The risk-reward is "less compelling" now, he writes, "than when the stock was in the $80-$90 range."

Adding to the growing buzz — some of which he helped create – around a possible refresh of Apple's (AAPL) iMac line of desktop computers, Kaufman Bros.' Shaw Wu issued a report to clients Monday morning with the latest update from his supply chain sources.

Noting that AppleInsider reported Friday that Apple seems to be running short of iMacs, Wu makes the following bullet points:

• Timing: "In our experience, when AAPL sends an advisory to its channel partners of limited availability and inventory of existing models are drawn down, it is highly likely that a product refresh is within a few weeks."
• Specs: Wu is now hearing that the new iMacs will be available in both dual-core and quad-core models. "We believe this makes sense as this helps AAPL create better tiers within the iMac family, utilizing quad-core for the high-end, and dual-core for mid-range and low-end."
• Market share: Wu estimates that the iMac accounted for 25% of Apple's Mac business last quarter (portables accounted for more than 70%) but could account for as much as 36% after a refresh.
• Mac Pro: He believes Apple's high-end tower, while less important than the iMac, is also likely to get updated. "We think a refresh utilizing upcoming Intel 'Nehalem' 8-core processors (and with two enabling a 16-core) would bring it better price performance and help jump start this highly profitable segment."

Wu leaves himself considerable wiggle room in terms of timing. Even as he writes about an update within a few weeks, he quotes sources indicating that the iMac is "due for a refresh in the March or June quarters."

The March quarter wraps up in eight weeks. The end of the June quarter is 20 weeks away.

See also: Why the iMac is late

If it was Steve Jobs' intention to take the wind out of Macworld's sails, he's done a pretty good job.

"Expectations are low," wrote Piper Jaffray's Gene Munster in a note to clients early Tuesday, one week before the first Macworld Expo keynote since 1997 that won't be delivered by Apple's charismatic CEO.  "No significant new products are expected."

"Fairly modest" is how Kaufmann Bros.' Shaw Wu described investor expectations for the Expo, which runs from Jan. 5 – 9 in San Francisco and which Apple (AAPL) has already announced will be its last. "Frankly, we would be a little surprised if there is a major announcement, as we believe it would make better sense for Steve Jobs to do so himself at an AAPL event."

Behind Steve Jobs' Macworld exit

Both Wu and Munster are looking for Jobs' keynote stand-in — senior vice-president Phil Schiller — to introduce updated iMacs and redesigned Mac minis — hardly surprises given that both machines are overdue for a refresh.

Munster has not given up on the "new form factor iPhone" — a.k.a. iPhone nano — that he once thought would be announced at the January event. Now he doesn't expect it to arrive before the end of Apple's second fiscal quarter, which closes in March.

And he is sticking with his famous prediction — the most optimistic of any mainstream analyst — that Apple will sell 45 million iPhones in calendar 2009. But he reminds clients that that figure is predicated on his belief that Apple will enlarge its iPhone offerings, vastly expand its retail outlets and significantly lower its prices. So far it's only done one of the three.

Wal-Mart to sell iPhone starting Sunday

Shaw Wu also sees "strong indications" of a lower-cost iPhone and other "larger form factor touchscreen devices" — a.k.a. iPod tablet — later in the year. His sources hint that Apple may introduce a new "consumer device" next week — possibly a jazzed up Apple TV or a superconnected Time Capsule — a.k.a. home server — that would let you grab your files or do backups from anywhere on the Internet.

And Wu hasn't ruled out the possibility that Phil Schiller will surprise everyone next week with a breakthrough product that nobody is expecting, if only to send the message that Apple is a "much broader and deeper company than one person, even if he/she is a living legend."

For our part, we haven't given up on the possibility that Steve Jobs will make a surprise cameo appearance during Schiller's keynote, if only to show that he's still kicking — Gizmodo's latest rumor to the contrary — and still very much in charge.

Steve Jobs in June

Traders may be punishing Apple (AAPL) for Steve Jobs' decision to skip his annual Macworld keynote — rekindling fears about his health in the wake of his 2004 surgery for pancreatic cancer — but analysts who follow the stock closely generally agree that those fears have been overblown.

Kaufman Bros. Shaw Wu is the latest to weigh in on the issue. In a note to clients Tuesday, he acknowledges that Jobs deserves a lot of credit for the "revival and success of Apple." In language that could have been written by Cupertino's PR department, he credits Apple's CEO with "helping revolutionize the world" with a long list of products and innovations, from the Apple II to the Apple Store.

But he argues that Apple doesn't need Steve Jobs to prosper, because his "spirit" has been "institutionalized":

"In our view, AAPL has an uncanny ability to attract and hire Apple 'fanatics' who are entrepreneurial, work hard, and are looking to change the world. The difference with AAPL today is that in addition to being innovative, the company has world-class operations and execution. We believe for a company of AAPL's size, … there are a lot of other people besides Steve Jobs driving success including members of its senior management team down to its 32,000 individual employees."

As proof, Wu ticks off a list of hit products that Apple introduced when Jobs was no longer there to drive innovation: the Macintosh Quadra, QuickTime, PowerMac and PowerBook, and Apple IIgs.

Okaaaay. But none of those products quite rises to the level of the iPod, iTunes, Mac OS X, the iPhone or the App Store.

In any event, Wu is sticking with his $12o price target. "With the pullback in the shares," he writes,  "we find the risk-reward favorable for longer-term investors."

Apple closed at 86.38 Tuesday, up 0.75% for the day.

Kaufman Bros. analyst Shaw Wu has been checking with his contacts in Apple's (AAPL) supply and distribution channels and reports that demand for the iPhone is "fairly healthy" in the U.S., Europe and, with the exception of Japan, most of Asia Pacific. He's anticipating sales of 6 million units for the December quarter (Apple's fiscal 2009 Q1), down from 6.9 million in Q4 but in line with the Street's expectations of between 5 and 7 million.

But that significantly understates actual demand for the iPhone, Wu says, because it doesn't include the wild card in this holiday season's iPhone sales: the iPhone gift card.

"We think there is strong reception of AAPL's new iPhone 3G Gift Card program," Wu wrote in a report to clients Wednesday, "where the process of giving the iPhone as a gift is greatly simplified without the need for activation and personal information. … We estimate several hundred thousand to one million units could be impacted."

The good news about these gift cards is that Apple gets to collect the revenue up front, which improves cash flow. The bad news for Apple's Q1 earnings is that it can't recognize the sale of an iPhone until the customer activates it. "The risk here is that the customer will likely activate post-Christmas," writes Wu. "Therefore revenue and units won't likely be recognized until the March quarter."

In a separate note issued Tuesday, Piper Jaffray's Gene Munster took a stab at estimating how many iPhones Wal-Mart (WMT) is likely to sell when it, as reported, begins carrying the devices three days after Christmas. Bottom line: Apple could sell as many iPhones through Wal-Mart in 2009 as it sells through its own Apple Stores. Munster's math:

"Our analysis begins with a simple count of 3,500 U.S. Walmart stores and 208 U.S. Apple retail stores. We are modeling for Apple to sell 45m iPhones in CY09; we assume that 30% (13.5m) are sold in the U.S., and one third of U.S. iPhones (4.5m) are sold at Apple retail stores. In other words, we believe the average Apple store will sell about 22k iPhones in CY09. In order for all 3,500 U.S. Walmart stores to sell as many iPhones as the Apple retail channel (4.5m), each store would need to sell 1,284 iPhones in CY09, or 6% of the total annual volume of each Apple retail store. We believe a Walmart store would likely sell a small fraction of the units that an Apple store would, but we also believe that 6% on a unit-basis is achievable."

UPDATE: Morgan Stanley's Kathryn Huberty, an analyst with a dismal record of predicting iPhone sales (see here), cut her Q1 estimate Wednesday to 4 million iPhones, down from 4.5 million (link). Her sales estimate for calendar 2009 of 14 million iPhones represents the bearish low end among Apple analysts. Munster's 45 million units is the bullish high.

We're getting an unusually sharp divergence of expert opinion on how well the iPod is likely to do this holiday season.

The conventional wisdom — reflected in Arik Hesseldahl's "Apple's iPod Problem" in Businessweek — is that everybody who wants an iPod already has one, and doesn't see much reason to upgrade, especially with the economy in the dumps. "As a result," he wrote, "some analysts believe this will be the first quarter since the iPod was introduced in 2001 that sales will decline from the year-earlier quarter."

Piper Jaffray's Gene Munster is one of those analysts. He's projecting sales of 18.6 million units in Apple's December quarter, down 16% from 2008 Q1.

A cooling off of this magnitude would mean that Apple' (AAPL) other business units — chiefly the Mac and the iPhone — need to pick up the slack if the company is to continue the quarterly growth to which investors have become accustomed.

But the reality on the ground, according to Kaufman Bros.'s Shaw Wu, is that iPods are selling like Christmas hotcakes.

In a note issued earlier this week, he reported that Amazon (AMZN), whose giant warehouses tend to have plenty of iPods in stock, was reporting a backlog of several models.

"iPod touch was surprisingly stocked out and now has lead times of 11 days for the 8 GB model and three to five weeks for 16 GB," Wu wrote. "This is likely due to unexpected strong demand and we find this interesting as iPod touch is Apple's highest-end iPod." (link)

Now AppleInsider's Katie Marsal reports that Apple is "scurrying to restock some of its reseller channels" as those iPod shortages spread.

In a new report to clients issued Wednesday, Wu writes that spot checks are turning up shortages at Best Buy (BBY), Target (TGT), Wal-Mart (WMT) and Crutchfield.com.

"Frankly, we find these sell-outs on iPods surprising, given how difficult the macroeconomic environment is," he told clients. "From our assessment, we believe iPod is holding up better than most, due to its relatively low [selling price] and strong consumer understanding of the value it provides." (link)

Wu estimates that Apple will sell some 21 million iPods this quarter — less than the 22 million it sold the year before, but not by much.

With less than two weeks to go before Steve Jobs' Jan. 15 keynote, analyst Shaw Wu of American Technology Research offers his best guess for what Apple's (AAPL) CEO might have up his sleeve at Macworld Expo 2008. In a note to clients issued this morning, Wu predicts:

• Blu-ray. Citing unnamed sources, Wu says that Apple will outline an HD strategy that backs Sony's Blu-ray format over the HD-DVD standard favored by Microsoft. (Although Wu hedges his bets and suggests that Apple might also use a combo Blu-ray/HD-DVD drive.)
• Subnotebook. Wu says Apple will re-enter the subnotebook space (nothing new there) but adds that Jobs may call the new machine the MacBook mini or MacBook slim. Any preferences?
• Movie rentals. Wu points out that the digital movie rental deals expected to be announced at Macworld are a departure driven by necessity, and represent a new business model for Apple. "Whether these movies expire based on time and/or usage is unclear to us," he writes, "But we do believe that rentals are a significant change in its philosophy."
• Speed bumps and external HDD: In the category of smaller announcements, Wu is picking up potential news related to speed bumps and or capacity bumps in current Macs and iPhones, and an external HDD storage/dock/streaming device for the Airport Extreme and the new MacBook mini/slim.
• Apple TV. Wu sees two big shortcomings in the current product: 1. no way to connect directly to the Internet for TV and movie content and 2. lack of a TV tuner. "Our sources indicate that AAPL is working on fixing these weaknesses to make Apple TV a much stronger product," he writes, later in 2008 or perhaps 2009, but not at Macworld 2008.
• 3G iPhone. Coming mid to second-half 2008 at a higher price point, Wu says, allowing Apple to reposition the current iPhone as a "more mainstream" product.