Apple shares rally ahead of iPhone 2 launch

Shares of iPod maker jumped nearly 3 percent after one analyst raised his outlook, citing stronger sales prospects.

Apple gained $5.04, or 2.69 percent to close at 175.16 on the Nasdaq stock market.

Analyst Keith Bachman of BMO Capital markets raised his earnings estimates for the electronics maker to $6.36 per share from $6.21 per share reflecting higher estimates on notebook sales and average iphone selling prices.

"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.

The new phone, slated to be released on July 11, will feature the media player and internet capabilities alongside calling that made its predecessor a success. It will also give users precise coordinates with a built-in global positioning system, and much faster download speeds with 3G network capabilities.

Cupertino, Calif-based Apple is expected to fare well with its Mac computers as well.

For the current quarter the analyst predicts that Apple will sell between 2.4 million to 2.5 million Mac computers, representing a 39 percent increase for the year.

An Apple spokesperson could not immediately be reached for comment.