Yesterday, Apple released a set of first-quarter results that can only be described as outstanding. Consumers just can't get enough of its products - and sales and profits trounced analyst expectations.
Sales of iPhones more than doubled, rising 128% to 37 million units. It was a similar story for its iPad tablet computers, which saw sales rise by 111% to 15.4 million units. And it shipped 26% more Mac computers. Only sales of its iPod music player disappointed, falling 21%.
Overall sales grew by 73.2% to $46.3bn.
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The really good news came on profits: operating profits more than doubled to $17.3bn, as Apple's operating margins continue to defy gravity rising from 29% to 37%.
The market's reaction was emphatic - the shares jumped by 8% to $452 in after-hours trading, valuing the company at $421 billion.
Is this as good as its gets?
Quite possibly not. You'd think that with this sort of performance, Apple would be one of the most expensive companies on the market. But that's far from being the case. In fact, it is arguably one of the cheapest.
Analysts' forecasts for this year's profits are likely to rise, but even before taking this into account, the shares trade on just under 12 times consensus earnings, according to Bloomberg. And if you take out Apple's enormous cash pile of $97bn, then it is trading on just nine times earnings.
Why so cheap? Well, it suggests that the market has serious doubts about Apple's ability to keep growing its profits. Indeed, we last tipped Apple as a cautious hold' at $369 in October which, given the company's stellar performance since then, was far too conservative - at least in the short-term.
But what about the competition?
Apple bears warn that its large profits will attract competition, which will eat away at its high returns that's how capitalism is supposed to work, after all. Some also question whether it will be able to be as innovative following the death of founder Steve Jobs.
Yet so far, Apple is confounding the sceptics. Google's mobile operating system, Android, is clearly a strong rival. But handset sales from Android users such as HTC have been disappointing, while BlackBerry maker, Research in Motion, is in turmoil.
Perhaps a bigger threat though it is probably too early to judge is Amazon's Kindle Fire tablet. The Fire's selling price less than half that of an iPad and attractive content mean that it stands a good chance of doing well.
So should you buy Apple shares now?
So far, investors betting against Apple have lost out. Its competitive strength looks to be growing while the $97bn of cash on its balance sheet gives it lots of options - could Apple even pay a big one-off dividend in 2012?
We still feel slightly nervous of Apple's ability to keep innovating, and also of the threat to the company from its rivals.
The fact that 88% of Wall Street analysts are buyers is rarely a good sign. Of the 57 analysts surveyed by Bloomberg, 50 say "Buy", six say "Hold" and one says "Sell". The average price target is $548 30% above the current share price. Most bullish is Piper Jaffray with a $670 price target; Berenberg Bank is the most bearish, with a price target of $445.
Yet the cheap stock market valuation is implying that this is as good as it gets for Apple. We suspect that might be a bit premature and weighing up the facts, it's hard to think that buying Apple shares is a risky investment just now. In short, we've been too cautious on Apple. Its cheap valuation and competitive strength means we rate it a cautious buy'.
Stock Market Code: AAPL
Price:$420
Market cap:$391.8bn
Net assets:$90.0bn
Net cash:$97.6bn
P/e (prospective):11.3
Yield (prospective):N/A
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