Roundtable: Too Late to Buy Apple?

Did you do a double-take when you saw the news that Apple (Nasdaq: AAPL) surpassed Microsoft (Nasdaq: MSFT) in market value to become the new king of technology? You should have, because we're looking at one of the greatest corporate turnaround stories of all time.

With Apple now the largest technology company, have investors sitting on the sidelines missed all the gains to be had on the elevator ride up to the penthouse? Other titans of technology that sport huge competitive advantages, such as Oracle (Nasdaq: ORCL), Intel (Nasdaq: INTC), and IBM, all possess attractive-looking forward earnings multiples in the low double digits:

Source: Capital IQ, a division of Standard & Poor's.

Is it time for investors to shift their investing dollars over to these safer companies, even though they offer less growth potential? Or does Apple's upside keep it atop the pack? With the iPhone booming in international markets, and the iPad selling more than 2 million units in less than 60 days, there's ample evidence that Apple's growth story is just getting started.

With that in mind, we asked three of our Fool analysts one simple question: Is it too late to buy Apple?

Rick Munarriz, Motley Fool Rule Breakers analyst/writer: For Apple, I think this is just the beginning. One can't deny that Apple will be more relevant in the future. The iPhone is just in its infancy abroad, and the smartphone sky will be the limit once Apple realizes that it has outgrown its AT&T (NYSE: T) domestic exclusivity. The iPad is a hit, and it's just getting started. Last month, my son's school sent parents a survey, gauging our opinion on replacing textbooks with iPads. Wow!

MacBooks are also selling briskly, and they still represent just a small fraction of the personal computing space. There is a clear path to serious upside in nearly all of Apple's lines. The iPod may be the only juggernaut that's peaking, but it's being replaced by bigger-ticket iTunes and App Store magnets such as the iPhone and iPod touch.

Despite Apple's heady gains in recent years, the shares aren't expensive. Did you know that Apple is trading for just 17 times next fiscal year's projected profitability? There certainly are cheaper values in tech, but they're also laggards relative to the class of Cupertino. One also has to consider that the company routinely spanks Wall Street's estimates. No matter where the analysts are perched now, Apple will find a way to land higher.

Tim Beyers, Rule Breakers analyst/writer: Let's set aside the hyperbole for a moment. Cats and dogs aren't living together, red wine still doesn't go with fish, the Lost finale wasn't a bad dream, and Congress is still inept. So what if Apple has passed Microsoft? That could change again at any moment, and Google could still topple them both.

Yet I still like Apple at these levels, and not just because of Europe's apparently voracious appetite for the iPad. At roughly $253 a share, the Mac maker is trading roughly in line with its expected earnings growth heading into fiscal 2011.

We can assume that iPad sales factor into Wall Street's projections, but we're also at the very beginning of the cycle. We don't really know what sort of earnings catalyst Apple's e-reader will be, but for the moment, it's fair to assume it's going to be big. Every major newspaper and magazine publisher is talking up new iPad apps, while News Corp.'s (Nasdaq: NWS) Rupert Murdoch acts as if the device is the newspaper industry's messiah.

He could have a point. In a recent survey of new iPad owners, ChangeWave research found that half of the device's owners (50%) read newspapers on their tablet device, compared to just 14% of all other e-reader owners. Similarly, 38% of iPad owners read magazines on the device, versus 11% of those who own competing e-readers. My well-documented doubts notwithstanding, Apple may have created a transformative device for content consumption.

Combine the growing body of evidence of the iPad's success with Apple's reasonable multiple, and I'd be a buyer of the company's shares -- if I weren't already an owner.

Anders Bylund, Fool.com writer: A few months ago, I named Apple as the worst stock to own in 2010. So far, Jobs and company have thrashed the overall market and every major rival, and I'm way out on the losing side of that bet. Congratulations, Apple shareholders. You now own the second-most valuable American company on the market.

Still, maybe it's time to cash in your profits and look elsewhere. This is getting ridiculous.

Apple's prospects still don't justify a share price built on dreams and empty calories. Assuming that everything works out just right for Apple over the next five years, analysts see 16.5% earnings growth per year. Using that data -- which I believe to be insanely liberal -- along with $12.2 billion of free cash flow generated in the last four quarters, a discounted cash flow calculation indicates that the stock is as much as 25% undervalued. Sounds like an awesome deal, right?

However, that's making a lot of favorable assumptions, and they can go wrong in a lot of ways. For example, the iPhone was a first mover in the smartphone market, and it also benefits from an army of loyal brand fans. In a flood of equally potent (and maybe even better) phones running the Google Android software, those early advantages will soon evaporate. Can its current growth continue once the iPhone is exposed as just another decent handset with plenty of alternatives? I don't think so. And that's just one of many risk factors.

Keep your shares until after Apple's Worldwide Developer Conference if you must, because nothing pumps the stock like Steve Jobs on stage in a black turtleneck. But then you'd best get out of this cult of personality.

What are your thoughts on Apple's future? Will you still be buying at today's prices? Discuss in the comments area below!