Apple stock, Is it overvalued ?

Apple has two product to boast of iPhones and iPads. But the market capitalization of Apple inc is about $580 billion (4.63% of total S&P 500 Market cap) -- exceeding market cap of the entire sector of Utilities, Telecom, and Materials-- about $426, $348 and $ 434 billion respectively. Needless to say Apple has outperformed the market (S&P 500 YtD up 8.6%) and all of its competitors given YtD and 1year return of 54% ($218) and 86% ($288). is it conceivable that speculation rather than fundamentals may be driving the stock performance? given the insane forecast by analysts that Apple might be the 1st stock with a $1 trillion market Cap by the year end 2012. Lets assume S&P 500 touches 1500 by 2012 end (optimistic forecast) then also Apple to be a trillion dollar stock will take its weightage in the S&P 500 index to 7.37% from already high of 4.63%. Personally i would prefer not to put so many eggs in one basket.

Next risk enamates from legal battle Apple is facing legal battle, right from Samsung, Motorola and HTC to a Chinese company and Department of Justice US Government. Problem with Apple is unlike its competitors (samsung website lists more than 130 phone models) it has only two core product (both of them insanely high margin) iPhone & iPad. If it falters even once it will fall from the high pedestal.

S&P 500 as of EoD 12th April, 2012 (Largest is indicative of Appl)

Number of Constituents		500
Adjusted Market Cap ($ Billion)		12,542.13
Constituent Mkt. Cap(Adjusted $ Billion)
	- Average	25.08
	- Largest	580.46
	- Smallest	1.15
	- Median	11.62
% Weight Largest Constituent		4.63%
Top 10 Holdings(% Market Cap Share)		20.50%

Source: Standardandpoors.com

However, give the credit where its due, Apple has consistently blew away consensus forecast, but ironically that makes it more susceptible to sell off, if it disappoint even once.

So are we nearing to a correction ? i think yes but unlike past fallen angels it will not be brutal.