Updated from 7:35 a.m. EST

Apple ( AAPL) 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) 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.

Chief Financial Officer Peter Oppenheimer said quarterly Mac sales figures exceeded the company's goal.

Late Wednesday, Tech research firm Gartner reported that Apple increased shipments 30.6% in the quarter to grab a 5.1% share of the PC market in the U.S.

Apple is continuing to " selectively expand the Mac channel," COO Tim Cook said, adding Macs to 50 Best Buy ( BBY) stores during the quarter.

Executives said the revamped Mac operating system, called Leopard, will ship in the spring as planned.

First-quarter gross margin exceeded the company's guidance, rising to 31.2% from 27.2% a year earlier.

Oppenheimer said better commodity pricing, a better product mix and higher revenue led to the upside in gross margins. For the March quarter, gross margins should be 29.5%.

The company generated more than $1.75 billion in cash in the first quarter, for a total of $11.9 billion.

When asked about stock options questions still swirling around CEO Steve Jobs, executives reiterated that the company continues to "voluntarily and proactively" inform the Securities and Exchange Commission of its findings.

Nor did Apple provide any new comment on the Cisco ( CSCO) trademark infringement lawsuit . Cisco claims Apple is using the iPhone moniker without its permission. Apple calls the legal action "silly."

Looking ahead to the next three months, Apple forecast revenue of $4.8 billion to $4.9 billion and EPS of 54 cents to 56 cents -- a traditionally conservative outlook that compares with consensus estimates of 60 cents a share and revenue of $5.24 billion.

"We've just kicked off what is going to be a very strong new product year for Apple by launching Apple TV and the revolutionary iPhone ," said CEO Steve Jobs in a press release.