Apple stock jumped $9.56, or about 10.97 percent, finishing at $96.75 at the close of regular trading hours after Morgan Stanley Dean Witter analyst Gillian Munson raised the company to "outperform" from "neutral" and set a price target of $120.
Munson tempered her enthusiasm for Apple with warnings of seasonal consumer demand, the lack of any new hardware product announcements at MacWorld, as well as other issues. Still, overall, the analyst showed strong support for Apple's direction and management.
"We like Apple's C2000 story and have been looking for a place to get into the stock given what we think is a good product pipeline, strong financials including an excellent balance sheet, and corporate enthusiasm and momentum," Munson wrote in her report.
In late November, shares of the maker of the colorful iMac and laptop computer iBook shot higher after several bullish analyst remarks.
But Apple is trading off its high of $118 early in December. The stock has traded as low as $32 during the last 52 weeks.
Last week, interim CEO Steve Jobs announced he will become Apple's full-time chief executive. Jobs, an Apple founder, has helped steer the company to profitability after several years of abysmal performance under changing CEOs.
"(Jobs') announcement that he is staying on as CEO is a very important vote of confidence for Apple, its employees and the Mac faithful," wrote Munson.
Munson also said that Apple stock is relatively cheap compared to other tech high-flyers.
"Apple is currently trading at a (price/earnings ratio) below the S&P 500 for C2000 numbers," wrote Munson. "We think that if interest rates worry investors about high P/E stocks, Apple will start to look more interesting."