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Upgrades Fail to Lift Apple

Updated from 7:35 a.m. EST

Apple (AAPL - Get Report) shares slumped early Thursday despite a raft of Wall Street upgrades prompted by Wednesday evening's first-quarter earnings blowout.

The Cupertino, Calif., tech titan blew away revenue and earnings estimates, boosted by a surge in iPod sales over the holiday quarter. But Apple shares, after soaring to an all-time high in the runup to the earnings report, dropped $3.41 early Thursday to $91.54.

The maker of Mac computers and the iPod portable music player put up a profit of $1 billion, or $1.14 a share, in its first fiscal quarter, compared with $565 million, or 65 cents a share, in the same period last year.

Sales totaled $7.1 billion, rising from $5.7 billion in same quarter a year ago.

Thomson First Call analysts had expected the company to make 78 cents a share on sales of $6.42 billion for the first quarter.

On Wall Street Thursday morning, at least five big banks boosted their price targets. Bear Stearns upped its target to $130 from $125, UBS raised its target to $124 from $118, Piper Jaffray boosted its to $124 from $99, Goldman ratcheted its up to $110 from $102 and Prudential inched its target up to $100 from $90.

But J.P. Morgan downgraded Apple to neutral from overweight, citing soft Macintosh shipments and ever-increasing expectations.

Apple said it shipped more than 21 million iPods, ramping 50% over the same quarter last year. Analysts had forecast iPod sales of 16 million to 17 million of the players.

While it maintained its market-leading position in the U.S. in the face of new competitors like Microsoft's (MSFT - Get Report) Zune , iPod shipments grew even faster overseas, particularly in Europe, the company said.

Meanwhile, 1.6 million Macs shipped during the three-month period, growing 28% year over year, and in the ballpark of what many expected. Still, it was flat sequentially, and some had hoped for more upside after such a surprise gain last quarter.
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