My ears are numb from all of the ringing of the dinner bells.
There seems to be a lot of cheerleading among Apple (NASDAQ:AAPL) bulls these days. The stock has fallen sharply since poking its head above $700 to hit an all-time high two months ago. Nor is there a shortage of encouragement among my fellow Fools. However, before approaching Apple as a bargain, it's important to assess the reasons it may not be the mother of all buying opportunities. Let's review.
1. All that cash isn't a cushion
It's true that Apple closed out its latest quarter with a little more than $121 billion in cash, short-term investments, and long-term marketable securities on its balance sheet. Divide that into Apple's 948.2 million fully diluted shares outstanding, and you get a compelling $127.87 in cash for every share of Apple.
However, it's not exactly fair to simply subtract all of that from Apple's valuation and assume that Apple is trading at an even cheaper multiple. It is, yes, but the difference isn't that extreme. The lion's share of Apple's cash is held up overseas. Repatriating profits would mean that a decent-sized chunk of that money would go to pay taxes.
Apple has a ton of money on its balance sheet, but some of it is spoken for.
2. Apple has been mortal on the bottom line lately
Remember when Apple used to make analysts look ridiculous? It would offer up conservative guidance, the pros would perch themselves just above that figure, and Apple would still blow Wall Street projections out of the water.
Well, beats have been rare since Steve Jobs passed away. In fact, Apple has come up short on the bottom line in three of the past five quarters. That's a pretty shocking statistic, especially for a company that had barreled to fresh all-time highs just two months ago.
3. The road downward is paved by those calling "bottom" prematurely
When Apple was trading 10% below September's all-time high, many argued that the step back was giving investors a new chance to hop on. When Apple's stock was trading 20% below its all-time high, many investors took the milestone to mean they would be rewarded to buy in as contrarians now that Apple's stock was entering bear territory.
What can we say about those mile markers now that the stock is better than 22% off its earlier high?
Calling a bottom is dangerous, especially since Apple -- despite missing Wall Street's profit estimates in back-to-back quarter -- is still trading 36% higher year to date.
4. Life after Steve Jobs won't be easy
Avondale Partners initiated coverage of Apple on Friday with a ho-hum Market Perform rating and an equally uninspiring $600 price target. Remember when some brave analysts were pointing at four figures?
Analyst John Bright sees reasonable growth for Apple's iPad and iPhone businesses in the coming years, but he's not entirely sold on the company's next act.
"We believe the probability of increased competition outweighs the probability of innovation without Jobs," he writes.
5. Apple's losing its tablet edge
Until about a year ago, whenever someone asked for a tablet, it was really a request for an iPad. Apple owned the tablet market, and rightfully so. It legitimized the then-fringe niche.
Now the market's changing. Amazon.com (NASDAQ:AMZN) has sold millions of its Kindle Fire since hitting the market last November. Google's (NASDAQ:GOOGL) own Nexus 7 -- made by Asus -- raised the bar again this summer on what tablets costing half as much as the iPad can do.
Industry watcher IDC claims that Apple's share of the tablet market shrank to 50.4% this past quarter. However, the real story is that Samsung, Amazon, Asus, and Lenovo -- the four largest players after Apple, and all making tablets based on Google's Android operating system --- have seen their collective share soar from 11.4% to 37.4% over the past year.
6. iPad Mini? $329? Really?
There was never going to be a winning price on the iPad Mini. If Apple charges too little, sales would merely cannibalize the more lucrative full-priced iPad. If it charges too much, consumers will stick to the $199 offerings out of Amazon and Google that have better resolution than Apple's iPad Mini.
The $329 price point that Apple decided on may be the worst of both worlds. It's not enough woo entry-level tablet shoppers, yet it may lead some to question why they should pay at least $500 for a slightly larger tablet.
7. Apple Maps is a sign of arrogance run amok
Heads rolled at Apple after the Apple Maps fiasco and the lampooned nature of Siri, but the real problem is that Apple let these very incomplete products hit the market and even shell out big marketing dough to promote Siri.
Does Apple merely think its consumers will put up with anything after forgiving the company for Antennagate? Maybe Apple doesn't respect its customers enough to care.
In singing Apple's praises, fellow Fool Evan Niu boasts of how the company is able to do more with less by pointing out how Apple spent just $2.4 billion in R&D last year. Microsoft (NASDAQ:MSFT) and Samsung shelled out $9 billion apiece. Even Google spent more than double in R&D than Apple. Yes, even Amazon spent more on R&D last year.
It's great that Apple can generate so much revenue by putting in so little, but what will it do when simply putting out the same iOS device in different-sized configurations stops passing for innovation?
8. Optimism is in retreat
One of the reasons Apple has been one of the best investments over the past decade is that it was a joy to see analysts scrambling to catch up. Apple would blow estimates out of the water, leaving analysts with little choice but to jack up their projections.
We've been going the wrong way in recent months. Just three months ago, Wall Street figured that Apple would earn $52.50 a share this new fiscal year and $60.53 a share come fiscal 2014. Now those same pros are forecasting net income of $50.14 a share in fiscal 2013 and $58.70 come next year.
Could it be that Apple's share price is merely catching up to a market that didn't see the shift to reverse coming?
Apple is a great company, but maybe it will only be a good -- and not great -- investment in the coming months.