Apple rises ahead of updated iPhone release

Apple shares gained $5.04, or 3 percent, to finish trading at $175.16. The stock has traded between $111.62 and $202.96 in the past year.

The company will release a new version of the iPhone on Friday that works on 3G, or third-generation, wireless networks, and supports satellite navigation. An 8-gigabyte model will cost $199, and a 16 GB model will cost $299.

Apple is also leaving behind revenue-sharing agreements with some wireless carriers, which frees the carriers to raise prices for their services.

In a client note Monday, BMO Capital Markets analyst Keith Bachman raised his fiscal 2009 earnings-per-share estimate for Apple to $6.36 from $6.21, predicting higher notebook computer sales and increased average selling prices on iPhones.

"Our thesis on Apple remains that CPU and iPhone share gains will drive earnings growth and the stock higher, compared with our expectations of continued weak iPod growth," said Bachman, who rates the stock "Outperform" with a $205 price target.

Bachman thinks Apple's June quarter was "solid," and believes investors see the period as a "stepping stone before the ramp of phones in the (second half of calendar year 2008), along with steady and solid CPU growth."

The analyst said that Apple could run out of iPhones soon after launching the updated device, citing "some recent production yield issues." Still, he thinks the company "will be able to catch up with phone demand during the quarter."

An Apple spokesperson could not immediately be reached for comment.