In the Feb. 20 session, Barclays' Ben Reitzes, a well-known Apple (AAPL -2.88%) bull, went ahead and downgraded shares of Apple to "Equalweight." This, in Wall Street parlance, is equivalent to "hold," which really means "sell." Reitzes' price target of $570 remains intact, representing roughly 7% upside, but it's clear that this is a neutral/bearish stance. The question now comes down to the following: Is Apple really the "value trap" that is implied by this report?

It depends
The two things that fuel a bearish argument against Apple are the following:

  1. Competition continues to intensify, as the rest of the industry aims to take some of Apple's out-sized share of mobile industry profits, hurting Apple's margins.
  2. The high-end smartphone and tablet markets are showing signs of saturation, proving to be a secular headwind to outperformance.

While these two trends are undeniable -- and Samsung is proving to be particularly formidable -- the bullish counter-argument goes something like this:

  1. People will pay a premium for differentiated iOS over the various Android phones.
  2. Apple can maintain or grow share in the high-margin, high-end of the smartphone/tablet space, particularly if Apple rolls out a larger iPhone soon.
  3. Apple can drive incremental growth beyond tablets and phones with a "next big thing," e.g., smart watch.

The truth likely lies somewhere in the middle of the extreme bull and bear cases, but it's to what extent those results are skewed that will really tell the tale. At this point, nobody knows the outcome; one can only make educated guesses based on past trends and an understanding of the companies involved. But there will be plenty of money to be made long-term for those who turn out to be right.

Stuck in a range?
Another interesting point made by the Barclays analyst is that Apple is basically going to be stuck in a trading range over the next year. This may very well turn out to be the case, and frankly, if Apple waits until the September time frame to launch its next-generation phones to counter the strengthening Android threat, then the stock may well be stuck in what looks to be a $500-$550 range, buoyed by the aggressive buyback program at the low end of the range.

However, Apple really does deserve the benefit of the doubt -- at least for now. The company has executed superbly for many, many years and has only gotten stronger over time. It's tough to imagine that Apple's skyrocketing research and development budget, which has shot from $2 billion at the start of 2011 to a whopping $4.8 billion exiting 2013, isn't going to produce something pretty spectacular, especially given how efficient Apple's R&D tends to be.

Foolish bottom line
Apple is a megacap company -- the largest on the market, in fact. It takes a lot to move the needle, so to speak, and even more to keep growth-hungry investors who were spoiled by Apple's growth story from 2004 to 2011 from becoming frustrated. While Apple does face competition and a generally tough environment, it would be unwise to underestimate the company, even without Steve Jobs at the helm. It's not yet time to declare Apple a "value trap," which is stock investing code-word for "done for." Not even close.