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I've been taking my lumps for hopping off the Apple (Nasdaq: AAPL  ) bandwagon recently.

As a bull of the class act of Cupertino for more than a decade -- even warming up to Apple before it was cool or lucrative to do so in its pre-iPod state -- doubts are starting to creep in.

What if Steve Jobs isn't replaceable? What if Apple's most recent disappointing quarter is the new trend? What if Google's (Nasdaq: GOOG  ) Android continues to gobble up smartphone market share, eventually eating into Apple's growth and bleeding over into tablets? What if falling prices force Apple either to slash margins to remain competitive or to retreat back to its familiar place as a premium player with a smaller audience?

 Apple fans will counter that these are tired questions that have been answered in Apple's favor. I don't see it that way, and I recently offered up six reasons why I'm not holding out for an Apple rally this year.

I'm not alone.

Don't look down
Morgan Keegan's Tavis McCourt issued a problematic analyst note yesterday, scaling back his price target from $530 to $513. That's not the worrisome part. McCourt's an Apple bull who's sticking to his outperform rating. If his target implies that Apple will be trading 25% higher a year from now -- instead of 30% -- it's obviously a smart decision to hold on to what should be another year of market-thumping performance.

Apple will rally. I will be wrong.

However, the thorny part of his note rests in how McCourt is scaling back his unit shipments on iPads and to a lesser extent Macs for the fiscal first quarter that ended last week. He now sees Apple moving just 13 million iPads during the holiday quarter, well below his earlier 16 million estimate. He is also now going from targeting 4.9 million Macs to 4.8 million. He is upping his iPhone tally, as many analysts have done since October's introduction of the iPhone 4S.

McCourt isn't the only analyst to shave iPad projections, but he's one of the first to connect the reduction -- in part -- with the success of's (Nasdaq: AMZN  ) Kindle Fire. Amazon clearly has a hit with its Android-fueled tablet, selling "millions" according to the company and between 3 million and 5 million according to analysts.

Many have assumed that Amazon's petite and somewhat limited device -- selling for just 40% the price of the cheapest iPad 2 -- won't eat into Apple's tablet sales. It's a booming niche, and the Kindle Fire will simply broaden the market with its entry-level gadget.

Well, McCourt feels that as many as 2 million of the Kindle Fires sold would have resulted in iPad 2 sales if it wasn't around. In his opinion -- and that's all that we can really go on at this point -- iPad sales are suffering because of Amazon's aggressively priced tablet.

Growth is still there
If we look at Apple's fiscal first quarter of 2011, the tech world's most valuable company sold 4.1 million Macs and 7.3 million iPads. Even under McCourt's hosed-down scenario, Apple is growing reasonably well in the otherwise moribund PC market, and tablet sales are nearly doubling. The number of iPhones should also nearly double.

However, my concerns were never limited to a single holiday quarter. I am more worried about what will happen as the year plays out.

When the iPad 3 rolls out in the coming weeks -- and it will -- Apple is unlikely to ignore the disruptive noise that's swelling on the low end. It's not just that Amazon is selling millions of Kindle Fires at $199 apiece. Many of the tablets that originally rolled out at iPad-esque prices -- if not higher -- are getting cheaper.

In some cases, it's just a fire sale. Research In Motion's (Nasdaq: RIMM  ) move to sell its remaining PlayBook tablets at $299 this week is a joke. RIM is desperate, and this is what desperate companies do to remain relevant. However, after watching RIM, webOS, and Android tablets fly out the door when they're priced at roughly half of an iPad's ransom, a ton of non-IOS gadgets flooding the market can't be sitting well with Apple.

I'm not the only one who has been predicting an iPad price cut for 2012, and it will likely happen by slashing the price of the iPad 2 once the iPad 3 hits the market instead of retiring the iPad 2 outright. However, what if the iPad 3 isn't a huge evolutionary step up for the platform and folks stick to cheaper iPad 2 devices? Sony (NYSE: SNE  ) has seen folks cling to cheaper PlayStation and PS2 gaming systems when pricier models came out. It may be sacrilegious to compare Apple to Sony, but hasn't Apple also evolved into a consumer electronics company for the masses?

The iPhone 5 to the rescue
Lower iPad prices -- and potentially lower Mac prices -- won't be enough to stall Apple.

Sterne Agee analyst Shaw Wu argues this morning that the iPhone 5, and not the iPad 3 or likely full-blown TV, will be Apple's real growth catalyst this year.

Hey, I agree. If the iPhone 4S has been a hit, just imagine what Apple can do with a real game-changer. However, as Android devices continue to multiply like guppies -- or Tribbles -- do we really know where consumer tastes and developer attention will be once Apple gets around to updating its handsets at some point this calendar year?

There are more uncertainties in Apple's future than you might think. Even if we're eyeing a blowout holiday quarter, growth should decelerate substantially for the balance of the year until we see where the market's at when the iPhone 5 is introduced.

The odds are clearly in the favor of the bulls, but Apple's not as cheap as you probably think.

The next trillion-dollar revolution will be in mobile, but the best investing play isn't necessarily Apple. If you want to cash in on the upcoming trend, a new report will get you up to speed. Yes, it's as free as this article, but it won't last forever, so check it out now.

The Motley Fool owns shares of, Google, and Apple. Motley Fool newsletter services have recommended buying shares of Google, Apple, and Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (9) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 04, 2012, at 2:19 PM, buffalonate wrote:

    If I had to bet all of my money on whether Apple would have a bigger or smaller market cap 5 years from now I would bet it would be smaller. It is already the second largest company in the world. Tablets and smart phones will eventually become commodities which will bring margins way down. Blackberry was the flavor of the month 5 years ago and look what happened to it.

  • Report this Comment On January 04, 2012, at 2:35 PM, artlaz wrote:

    What you're missing is that Apple is becoming the low cost producer in many areas because of it's supply chain and I.P. investments and will not be undersold when products are truly comparable. Look at ultrabooks, the category Apple invented with the MacBook Air, the new entrants are priced very similarly to Apples products - and Apple is arguably a lot better. Ditto in phones, the iPhone is not priced any higher than the Galaxy II or similar top-of-the-line smart phones, and Apple has a damn good phone for $0 with a contract in the 3GS. Comparing the Kindle Fire to an iPad is like comparing a Yugo to BMW. If Apple built a 7" stripped down, plastic body tablet like the Fire it could sell them for $250 each and make it's normal 40% margin - and it might decide to do that - and it wouldn't be slow, buggy and light on apps, it would be an iPad. This is not your father's Apple, have a little faith.

  • Report this Comment On January 04, 2012, at 2:39 PM, Emperor2 wrote:

    Rick, instead of blindly quoting these "professional" analysts, do your homework and see what some of the amateur people are predicting. The track record of many of the amateur's has consistently been far better than these highly paid "professionals". One of the most accurate, historically, has been Andy Zaky of Bullish Cross. This is quoted from his article on Seeking Alpha on Dec 16th, 2011. We will see on January 24th if Andy is more accurate or Morgan Keegan's Tavis McCourt. Based upon past history, my money's on Andy (and Apple)

    "The largest company in America is about to grow its earnings by a whopping 84% this quarter, and Wall Street is asleep at the wheel. Apple’s trailing twelve months of earnings is going to skyrocket from $27.68 to at least $33.00 which will finally drive Apple’s P/E ratio down into the 11′s. While fund managers continue to debate whether they should buy Amazon (AMZN) at a 95 P/E ratio or Google (GOOG) at 22 P/E ratio, Apple will have reported more in revenue in one quarter than each of these companies reported all last year.

    "We expect Apple to report $11.75 in EPS on $42 billion in revenue in fiscal Q1, which compares to the Wall Street consensus estimates of $9.79 in EPS on $38 billion in revenue. The Bullish Cross outlook, if proven accurate, will amount to Apple reporting the largest revenue and earnings blowout in the history of the company.

    Yet, not only do we believe that Apple will comfortably ship 32 million iPhones without a hitch, we think our expectations will actually prove too conservative. In fact, we believe that Apple will actually end up reporting sales of more than 35 million iPhones which will cause the heart attack of at least several hundred short sellers. It will be a total deer-in-head-lights type earnings blowout where people just stand there and say “what just happened” repeatedly while slowing doing the defeated head-shake. CNBC contributor Steve Cortez will be among their number with his admitted Apple short position.

    "While we think Apple will basically more or less report in-line on iPads, iPods and Macs, iPhone sales will redefine everything Wall Street thought they knew about the company. The minute this report hits the Street, the cyclical Apple bear will be shot point blank in the head. You’re going to see the sentiment shift from ultra-bearish to ultra-bullish in mere seconds. We’ve seen it happen before and we’re about to see it happen again in fiscal Q1. So the bears have about three to four more weeks to live. Enjoy it while it lasts."

  • Report this Comment On January 04, 2012, at 2:41 PM, jargonsays wrote:

    Similar fears and scenarios surrounding Apple are promoted every year. This year is no different. You need to look at how well Apple is positioned relative to its competitors and to the market as a whole. I personally don't see much weakness right now. The only way I see Apple's market cap to be smaller 5 years from now is if the entire global economy collapses and the S&P500 drops to 20% of current level. In that case I will probably want some Apple anyway because their 100 billion cash balance will enable them to survive and compete better than most companies.

  • Report this Comment On January 04, 2012, at 2:43 PM, SkippyJohnJones wrote:

    If I had to be all of my money on whether Apple would have a bigger or smaller market cap 2 years from now, I would bet larger. I might even go all John Corzine and leverage the bet. Of course a special dividend would have to be factored out for fairness sake. I can't see 5 years into the future. Ten years ago the clickwheel was an amazing revolutionary feature, and 5 years ago the iPhone was still a skunkworks project.

    Even if the tablet share drops to sub 50% (ACTUAL share of ACTUAL tablets that is, not shipped volume of heavily discounted closeouts), Apple can grow the iPad at 100% for the next couple of years. iPhone has not shown any signs of topping out, with 4S expected to have grown at roughly 100% Y/Y in the upcoming earnings announcement. Mac is still chugging along at 25-30% growth. Apple has a very high ceiling over the next 12-24 months with its existing portfolio. It needs literally no catalyst to add the next $100B to its market cap.

    I have no idea what will be the driving force for future innovation and growth, but I'd put my chips on AAPL before anyone else. And at a completely reasonable valuation with all the cash in the world on the balance sheet, it isn't exactly risky. The joy of holding common stock is that it is totally liquid. I'm willing to bet that the signals will be there with plenty of time to get out within 10% of the top, should it come any time soon.

  • Report this Comment On January 04, 2012, at 2:53 PM, patitas2 wrote:

    Check this out

    1- What is the life time of a PC. Compeers wit a MC

    2- What is the life time of Laptop. Compeers wit a Mac Book pro

    3- What is the life of IPod. Compeers wit ???? did you throw it no

    4- What is the life of I pad. Compeers wit????????? Did you throw it no you my sale it in eBay

    5- What is the life of I phone. Compeers wit Android. Second hands I phones you bay in e Bay

    6- Anything that is Apple last and cost more in time that “ it is cheaper to the rest”

  • Report this Comment On January 04, 2012, at 3:00 PM, Davewrite wrote:

    "Apple is in serious trouble now. Although recently having great success with it's innovative iPod, Microsoft the biggest tech company in the world is putting its mass and betting billions of dollars in development and advertising money. But besides giant Microsoft many other technology companies are also ramping up with a whole host of music players like Sony, Phillips, iRiver, Sandisk, Toshiba, Creative Nomad and many others. Beside huge tech companies like Sony with deep pockets and roots in the music business already selling hundreds of millions of Walkman (Apple is a newbie with no music player experience) there are also dozens of new low cost Asian manufacturers gearing up for the mp3 war like Han Go, Archos, SaeHan.

    THERE IS NO WAY with this massive tidal wave of dozens of mp3 player models fitting every customer desire at a lower price that Apple a high cost maker will survive with the iPod. Although aapl has had a nice run recenty there is no way it can continue, it's peaking , SELL"

    OOPs… sorry that bit of news was so years ago…

    (get my point? By the way Apple also won the PC wars now taking over 30% of the world's Pc profits. IBM doesn't make PCs anymore. Dell is saying they are focusing on 'services' for business and HP is thinking of dumping it's PC line while macs are selling like crazy and a giant profit machine. )

  • Report this Comment On January 04, 2012, at 3:01 PM, EquityBull wrote:

    Doesn't matter..Apple is priced for negative growth right now. Every worse case scenario and then some is priced in. This leaves upside if the company merely holds their revenue and profit line for a year or two. Maybe 50% to 100% upside on the stock

  • Report this Comment On January 06, 2012, at 2:32 AM, lowmaple wrote:

    Blaircrow. i don't know info, but idiot or not, has nothing to do with apple

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