Apple's Front-Runner Challenge

And some think that instead of simply defending its lead in the music space, Apple will go on the offensive and take its technology into other digital media markets.

"We're in the early stages of a revolution," said Steve Wallman, a hedge fund manager whose fund is long Apple. "I think Apple is poised to do well in that next phase. I think the iPod is simply a foreshadowing of what's to come."

But even if everything goes right, the company's stock valuation of about 35 times projected earnings for its next fiscal year still makes valuation an increasing concern, Bare said.

"It's tough to think of a company that firmly entrenched in the computer and consumer electronic business sustaining a [valuation] that's so high," he said, adding that his fair value for Apple is about $19, an extreme minority view considering the plethora of Wall Street price targets at around $50. The company's stock closed Wednesday at $44.12.

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