Wall Street is a fickle place. One day a company is the most cherished, and the next, it becomes the most hated. In today's market, Apple (NASDAQ:AAPL) has become the poster child of how a company can go from darling to doubted in an instant. There has been a near-endless string of reports of dramatic iPhone production cuts, iPad Mini cannibalization fears, and a general nervousness toward its emerging-market saturation. Of them all, the iPhone is the 800-pound gorilla that investors should be most worried about. Last quarter, iPhone sales made up over 47% of its revenue, but more importantly, the iPhone 5 will be a key driver of Apple's total gross profit margin this quarter, because it starts at 68% and works up from there.

ASP watch

Source: Apple press releases. iPhone unit figures in thousands.

For Apple to calm investor worries, it needs to prove that the high-end iPhone market remains robust by posting an increase in its average selling price. The fear among investors is that iPhone adopters are not upgrading to the iPhone 5, and instead are upgrading to the more the affordable and adequately equipped iPhone 4/4S versions. Considering the iPhone 4 costs zero dollars in the U.S. under a carrier subsidy, for the money it may be "good enough" as a no-brainer upgrade. If iPhone 4s are sold instead of newer models, it's a given that iPhone ASP will erode. The mitigating factor will be if demand for the $849 iPhone 5 64 GB was robust enough to make up for this headwind. If Consumer Intelligence Research Partners has any insight into the situation, the outcome isn't looking promising.

According to CIRP, 9% of iPhone 5 sales came from the 64 GB version in October 2012, whereas the iPhone 4S 64 GB brought in 23% of the share when it was release the year before. At the time, the fear was that the iPhone 3G would erode ASP, but healthy uptake of the iPhone 4S 64 GB boosted iPhone ASP by $16. This time around, CIRP sees the iPhone 5 taking 68% of total iPhone sales during its debut month, down sharply from the 90% seen during the iPhone 4S debut. Investors are basically in the same uncertain situation about iPhone ASP, except this time consumers are deciding between three very compelling models.

The folks over at Changewave just released their quarterly consumer smartphone report, indicating that iPhone 5 demand is about to take a hit in 2013. According to its December survey, 50% of North Americans plan on buying an iPhone in early 2013, down from 71% in the previous quarter. Considering the iPhone 5 has been available since October of last year, it's not surprising that demand has tapered off. The troubling sign is that the pace of the decline is steeper than it was during the iPhone 4S cycle. During Apple's conference call last quarter, CEO Tim Cook mentioned that the iPhone 5 was the company's fastest product rollout ever. In other words, Apple can (in theory) capture more sales in a shorter period than was possible with previous iPhone generations. It could be that Apple has simply reached product saturation quicker than past cycles. Either way, if this forces Apple to lower its forecast as a result of lacking demand or accelerated product saturation, investors are not going to be pleased.

Market share peaking?
In 2014, smartphones are expected to account for 50% of all handset shipments, a number seen increasing to 69% in five years. During this period, ABI Research predicts that Apple's market share will reach 22% this year and remain flat through 2018. ABI sees Samsung as the top dog, noting "the company is so massive that the future of the mobile OS landscape will be heavily influenced by the products it releases." Since Apple is lacking in the low-cost smartphone department, an area which ABI views as crucial to growth, it will be unable to drive market share gains. Should this forecast holds merit, Apple's market share may not grow, but its user base would still be increasing.

No buts about it
If Apple wants to hit a home run this earnings season, it needs to report an increase in iPhone ASP and raise its business outlook. Together these factors will go a long way in easing investor concerns about the future growth trajectory of the company. If Apple fails to deliver, this will become yet another reason to sell Apple.

Fool contributor Steve Heller owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of 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.