"There are a lot of ways [Apple] could go to bring all those [digital content] pieces to market that's more seamless and integrated than anything else out there. That seems to be [Apple's] strength," says Stephen Baker, who covers the computer industry for the NPD Group, a research firm. "This is a good year to do it."

Amid all the speculation is one certain change for Apple's products next year: On the Macintosh side, the company will begin to move away from its long reliance on PowerPC processors from IBM (IBM Quote) and Freescale Semiconductor(FSL Quote) to using chips from Intel (INTC Quote).

For bulls, the move portends good things for Apple in the PC market. Consumers are increasingly looking to buy laptops instead of desktop computers. While Apple's laptops have long been praised for their design, they increasingly have been seen as underpowered, thanks to the long delay by Apple's PowerPC suppliers in developing a low-powered version of the high-end G5 processor.

Once Apple makes the switch to Intel, the company's laptops no longer should be at a speed disadvantage to competitors, analysts note. Intel has a robust line of notebook chips, which are the industry's standard.

The switch "is going to help them a lot," says Van Baker, an analyst with research firm Gartner. "This solves one of the big problems that they've had."

Despite the obstacles on the notebook side, Apple's worldwide share of the PC market has risen from roughly 2% in 2004 to about 2.4% through the first three quarters of 2005. Some bulls think that market share will rise to as much as 10% in coming years, thanks not only to the Intel chips, but by using the iPod to attract new Macintosh customers -- the so-called halo effect.

"The halo effect is definitely here," says a portfolio manager at a major financial services firm who is long Apple.

But beyond new products, fans of Apple's stock make the case that the company can continue to outperform the market by simply doing what it has been doing. IDC projects that the worldwide market for digital music players will grow to 106 million units next year. Meanwhile, Apple estimates that it has about 75% of the U.S. market for digital music devices.

Assuming that it can maintain that dominance and extend it worldwide next year, Apple would sell 75 million to 80 million iPods next year, likely more than double the number it will sell in 2005, notes Coleman. Estimating that the company makes $50 on each iPod it sells, that number of total unit sales would yield about $3.75 billion in profit in calendar 2006, Coleman says.

In contrast, Apple earned just $1.3 billion in fiscal 2005, which ended in September.

"The iPod story is powerful enough ... that they don't need help" from new products, says Coleman. Any new products would be "just another source of value creation."

Though Coleman is focusing on the growth of the digital music market, Pip Coburn, CEO of Coburn Ventures, believes that people are overlooking the growth of Apple's retail store base. The company now has some 130 stores, up from just 65 at the end of fiscal 2003.

What's impressive is not only the growth, but the increasing sales that the company is making through its stores, says Coburn, who is long Apple. Based on year-end store counts, the average Apple store made about $19 million in sales in fiscal 2005, up from about $10 million per store in fiscal 2003.

Given that Best Buy (BBY Quote), for instance, has more than 700 stores and Gateway (GTW Quote) had hundreds of retail outlets at its peak, Coburn believes Apple can easily hit 300 stores over the next three years, helping ratchet up sales and earnings.

"You can get to their [expected] earnings numbers easily just from the stores without any heroic assumptions," he says. "Their growth is almost dialed in."

Still, not everyone's convinced. Indeed, with the stock trading around 39 times expected fiscal 2006 earnings (its shares have spent most of December above the $70 level), some analysts and investors have become nervous -- witness the two downgrades earlier this month that sent the stock stumbling on valuation concerns. At its current P/E, the company stock could further slide on any hiccup in its operations.

And the coming months offer a number of potential trouble spots. Although the transition to Intel chips hasn't seemed to affect Apple's computer sales to date, some analysts worry that sales of Power PC-based machines could slow after the Intel-based ones start to roll out.

In the meantime, the company seems to be having trouble meeting holiday demand for its popular iPod nano, with many retailers outside of Apple reporting the device as being out of stock or back-ordered.

Steve Wallman, who runs his own eponymous hedge fund, is both an aficionado of Apple products and an investor in the company. While he's impressed with the transformation of the company under CEO Steve Jobs in recent years, he's concerned about the expectations that are now built into the stock -- comparing them to winning three Super Bowls in a row, a feat never achieved by any National Football League team.

After what Jobs has done so far, "you kind of give them the benefit of the doubt. But from an investment standpoint, it's not an easy hold at this price level," says Wallman, who is long Apple shares. "I certainly wouldn't be a buyer at this point."

But others, like Jim Grossman, a portfolio manager at Thrivent who is long Apple, feel that with this company -- and stock -- you've just got to believe. "At times, you've got to abandon traditional financial metrics and, for lack of better terms, drink the Kool-Aid," he says.

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