Apple Retests Its Consumer IQ

Wall Street obviously has been listening to the sounds of Apple's success and many experts don't see an end to the boom in sight.

"I think you've got a product here in the iPod that's really barely scratched the surface" of potential demand, said Scott Rothbort, president of LakeView Asset Management and a contributor to TheStreet.com's sister Web site Street Insight. (Rothbort is long Apple.)

And if the iPod or Mac mini are able to lure new Macintosh buyers, the company could see a revenue windfall. "That's the case that a lot of bulls are making," Rothbort said. "It doesn't take a lot [of market-share change] to move [Apple] to the next level."

But that bullishness has now boosted the stock to a point at which some analysts are beginning to question whether investors have grown too enthusiastic. In a research report last month, Lehman Brothers analyst Harry Blount nudged up his price target on Apple shares but reiterated his equal weight rating on the company's shares, noting he was growing wary of the company's valuation.

Indeed, with a price that is 39 times the company's projected earnings for its current fiscal year, Apple's shares are trading at a premium to its rivals'. Shares of PC industry leader Dell (DELL Quote), for instance, are valued at about 26 times the company's projected earnings for its coming fiscal year.

And analysts aren't the only doubters. In an interview with CNET News.com last month at the CES trade show, for instance, Microsoft (MSFT Quote) Chairman Bill Gates, long the bete noire of the Apple universe, pointed to Apple's past.

Asked about the company's current success with the iPod, Gates noted that Apple "had a hit with the Apple II, they had a hit with the Macintosh. ... In the long run, there will be a lot of people making digital music players, and we think that there will be a very different market share with dozens and dozens of companies."