Iphone

Image source: Apple.

Right now, Apple (NASDAQ:AAPL) investors are kind of freaking out about the possibility of weaker-than-expected iPhone sales.

Just this past week, Credit Suisse predicted that iPhone unit sales would decline for the first time ever, highlighting global smartphone saturation and noting that this is why Tim Cook is now focused more on Android switchers than ever before. The news came shortly after a handful of other Street analysts reduced iPhone estimates. Then some light forecasts from iPhone suppliers also added to the negativity. That's just this past week; there were similar reports in November. Shares have lost 9% of their value in the past couple of weeks.

It's an emotional gut reaction to negative sentiment surrounding Apple's most important product line. It makes sense. Until it doesn't.

Dollars and sense
But the reality is that even facing unit deceleration in its most important business, Apple's fundamentals are remarkably intact. In fact, the contrarian play here would be to take advantage of the fears and buy shares.

Sure, the notion of "first-ever decline in iPhone history" does sound scary, but it's really not. Eventually, the iPhone business will peak in terms of unit volumes, particularly as the global smartphone market matures, but that doesn't mean the iPhone business is a bad business. Quite the contrary: The iPhone business is an incredible business that has now generated $155 billion in trailing-12-month revenue (enough to be No. 6 on the Fortune 500 were it a stand-alone business).

In other words, the iPhone business is maturing. That's not to say that Apple will never enjoy iPhone unit growth again, but rather it shouldn't be as expected. As long as Apple is able to even sustain these levels of unit volumes at its current operating margin levels, the iPhone will do just fine. Apple might be able to continue increasing average selling prices through upsells, or further realize cost efficiencies to grow margins.

All the while, Apple will be using all the cash that the iPhone brings in to keep repurchasing shares hand over fist, which will drive down shares outstanding, boost earnings per share, and keep valuation metrics fairly cheap. Unit growth isn't necessary for any of those things to occur, and investors must come to accept this fact, even if it's a painful process.

Don't let the jitters get you
To be clear, even as analysts adjust their estimates, they're still mostly bullish on Apple's long-term prospects because they understand how all of these pieces fit together. But the market seems to be getting caught up in negative news cycle and investors are having "iPhone jitters." Apple is currently trading at 12 times earnings and has delivered over 40% earnings growth over the past four quarters. It can still do that even if iPhone unit sales are about to peak.

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends 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.