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Wall St. sees Apple hitting highs on new launches

While Apple earnings for the third quarter were middling at best, Wall Street analysts are abuzz with this the next three months and history is on their side.

Over the last 5 years Apple stock has risen on average 18 percent in the quarter as the company’s product releases are unfurled.

Reports say Apple may introduce a larger iPhone amd its iWatch along with one or more devices with biometric capabilities and integrated user health monitoring technologies.

The strongest message for Apple’s honchos came from Andy Hargreaves and Corey Barrett, analysts at Pacific Crest Securities, who sent a note to clients immediately after the results.

On the bright side, they said near-term downside for shares will be limited by gross-margin — revenues less the cost of goods sold — stability into the iPhone 6 launch and the potential for significant unit upside in 2015.

“However, we believe a massively profitable new product is necessary to drive meaningful upside to Apple. As a result, if new products do not materialize in a new huge profit pool, we are not likely to maintain our outperform (rating),” said Hargreaves and Barrett, who have a $100 price target on Apple.

On Tuesday, Apple reported its second-straight quarter of double-digit percentage growth in iPhone sales, and Chief Executive Officer Tim Cook gushed on a conference call about huge demand for the iPhone from Brazil, Russia, India and China. There was also news that Apple was awarded a patent for a wearable watch dubbed the iTime , as fresh buzz circulated over the expected autumn release of Apple’s supersize iPhone.

The Pacific Crest team said guidance for Apple’s gross-margin suggests a strong starting point for the iPhone 6. For the fourth quarter, Apple is expecting gross margin of 38 percent, which is in line with initial gross-margin guidance for the second and third fiscal quarters. That also points to the likelihood of an increase in gross margin for next year, the analysts said.

Meanwhile, Cantor Fitzgerald’s Brian White said investors are setting their sights on the ‘Fab Fall’ launch, the ramp with China Mobile and the company’s broader push into the enterprise market with IBM.

White said in a note to clients late Tuesday that he was shrugging off the results and looking ahead to the autumn launch expectations, which are encouraging for Apple’s margin outlook. However, he said his estimates and price target for Apple are currently under review. Cantor has a buy rating on Apple and a $111 price target.

Mizuho Securities’s Abhey Lamba and Alexandra Ugljesa reiterated their buy rating and $105 price target on Apple in a note that came late Tuesday, saying shares should gain from the upcoming product cycle, leverage from buybacks and increased retail participation.

And more than one analyst commented on Apple’s free cashflow. Aaron Rakers and the team at Stifel Research said Apple has an impressive, consistent free-cashflow story.

“Apple has now had eleven consecutive quarters where trailing twelve months free cashflow stands at more than $40 billion.” Stifel rates Apple a buy with a $110 target price.