The Zacks Analyst Blog Highlights: Apple, Google, Research in Motion, Nokia and Amazon.com

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Mar 09, 2012, 09:30 ET

CHICAGO, March 9, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Apple Inc. (Nasdaq: AAPL), Google Inc. (Nasdaq: GOOG), Research in Motion Ltd. (Nasdaq: RIMM), Nokia Corp. (NYSE: NOK) and Amazon.com Inc. (Nasdaq: AMZN).

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Here are highlights from Thursday's Analyst Blog:

Apple Upgraded to Outperform

After a stellar first quarter, we have upgraded Apple Inc. (Nasdaq: AAPL) from Neutral to Outperform with a price target of $654.00. Apple reported robust revenues, driven by strong holiday season sales based on the ramp in demand for the new iPhone 4S. Better-than-expected sales from the iPad and Mac series also helped Apple to register a stupendous first quarter 2012.

Apple is widely recognized as a leading innovator in the consumer electronics market. After successfully rolling out the iPod, iPad and iPhone, the company launched its iCloud services in October 2011. Currently, Apple's cloud strategy is focused on developing storage and streaming services.

In our view, Apple has a loyal customer base and products launched by Apple have been extremely successful historically. Given Apple's significant brand equity, the company has been able to create and maintain a dominant position in nearly all its served markets.

Moreover, the iPhone 4S has gained tremendous success since its release in October 2011 on the back of an increased number of carriers operating all over the world (total number of carriers are now 230 spanning 105 countries) coupled with robust holiday season sales in 2011.

The iPhone remains Apple's key growth driver in international markets, with two-thirds of iPhone sales now coming from overseas. We believe that strong international growth will compensate for the slowdown in the domestic business going forward.

Apple's international sales, especially in markets such as Russia, Brazil, the Middle East and a major part of the Asia-Pacific, particularly China and India present huge growth potential for the company, primarily owing to the growing affluence of the middle class, which forms a significant part of the total population.

Apple's iPad 2 tablet continued its momentum and the rumored release of iPad 3 in March will extend its leadership in the tablet market. Also, there are rumors about the launch of the new 8GB iPad 2 to compete against the Windows 8-based tablet PCs, according to Digitimes.

If this happens, the forthcoming quarters will likely enjoy robust gains. In either case, we continue to believe that significant market share gains will drive top-line growth going forward.

However, Apple is facing tremendous competition in the smartphone as well as tablet market. In the mobile hardware segment, Apple has a host of large competitors such as Google Inc. (Nasdaq: GOOG) (acquired Motorola recently), Research in Motion Ltd. (Nasdaq: RIMM), Nokia Corp. (NYSE: NOK), Samsung and Sony Ericsson that have launched attractive competing products, setting cutthroat competition for Apple.

Additionally, we believe lesser barriers to enter the market is increasing the competition for iPad. Several new entrants such as Amazon.com Inc. (Nasdaq: AMZN), Motorola and HTC are flocking to the market. Apple is expected to face significant competition from Amazon's Kindle Fire going forward.

Lastly, Apple remains entangled in various legal battles over its mobile and tablet products. The company is fighting a number of lawsuits against its long-term technology partner Samsung in several countries including the U.S., Australia, Germany, Korea, Japan, the Netherlands, Britain and France.

As competition heats up in the mobile and tablet space, we believe Apple will have to deal with a larger number of lawsuits. Thus, increasing legal expenses will be a negative for Apple's operating profit going forward.

Nonetheless, we believe that Apple remains the biggest growth story in the technology sector, primarily on account of its superior product pipeline, Apps, strong iCloud revenues, the upcoming iPad 3 update, loyal customer base and international expansion going forward. Despite the legal complexities and increasing competition in iPad and iPhone segments, we are optimistic about the company's growth prospects in the long term.

Currently, Apple has a Zacks #1 Rank, which implies a Strong Buy rating in the near term.

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