Is Apple Mania Warranted?

| About: Apple Inc. (AAPL)

By Paul Quintaro

Ever since consumers fell in love with the iPod, it seems as though Apple (NASDAQ:AAPL) has emerged as the most beloved company in America, and possibly the world.

Last week, the company released impressive earnings, demonstrating the full power of the company’s ability to create electronics consumers crave. In the wake of Apple’s earnings, shares of the company’s stock rallied, briefly reaching $400 a share for the first time in the company’s history.

On Thursday, the company released a host of new products, including a new Thunderbolt docking station for its popular MacBooks and MacBook Pros and a new operating system, OS X Lion, which has thus far sold over 1,000,000 copies.

It’s hard to deny Apple’s cult-like following; there’s literally a popular blog centered on the company known as Cult of Mac. Yet, at the same time, are investors simply becoming too bullish on the company?

Currently, Apple’s market cap stands at over $360 billion. For comparison sake, General Electric’s (NYSE:GE) market cap is a mere $200 billion; General Motors (NYSE:GM) is $50 billion; and Visa’s (NYSE:V) market cap is $74 billion. Even legendary blue-chip IBM’s market cap is less than Apple’s, standing at only $225 billion.

Is it rational for the maker of what largely amounts to high-end consumer electronics to be valued more highly than IBM and GE? In terms of its computers, the company’s hardware is comparatively expensive. While it is possible to purchase economy PCs for as little as $300, the cheapest Mac costs twice that amount. Further, Apple’s computers presently comprise little more than 10% of the market.

Simultaneously, while Apple may continue to dominate the smartphone market, Google’s (NASDAQ:GOOG) Android is catching up, activating over twice as many phones per day as Apple.

Still, it’s hard to argue against the company’s impressive cash flow. Apple currently sits on a war chest of cash valued at over $70 billion. That means Apple could, for instance, buy Netflix (NASDAQ:NFLX) four times over.

On Friday, rumors swirled that Apple was looking to use some of that money to purchase Hulu. That purchase could strengthen the company, as it could incorporate Hulu’s service into its own Apple TV.

With Apple’s brand power and cash hoard, there may be more room to grow. Of course, if cash-strapped consumers abandon the company’s relatively expensive offerings, shares could decline to a less impressive valuation.