Apple Inc. (AAPL) reported an outstanding second quarter, with its earnings per share comprehensively beating the Zacks Consensus Estimate by $2.27. We think management guidance was conservative as usual and believe Apple remains the biggest growth story based on its superior product pipeline, apps, iCloud, Apple TV, loyal customer base and international growth opportunities.
However, Apple's ability to spur the popularity of its products in developing nations, where pricing is often an important consideration, will largely influence the company's future growth. Also, stiff competition from Samsung, HTC and Google; saturation in its major markets and increasing legal complexities remain concerns.
We maintain our Outperform rating and set a price target of $685.00. This is based on 14.6X 2012 EPS; currently, AAPL shares are trading at 13.9x 2012 earnings.
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