This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Kass: Upset the Apple Cart

This column originally appeared on Real Money Pro at 8:45 a.m. EST on Jan. 24.

NEW YORK ( Real Money) -- Since late September 2012, when I initially wrote " The Bear Case for Apple," Apple's (AAPL) shares have fallen in price from $700 a share to $470 a share.

What should investors learn from Apple's abrupt fall from grace over the past four months?

To me, Apple's fall speaks volumes regarding the risks of lemming-like behavior on Wall Street (especially at inflection points of popularity) as well as having more Apple-specific ramifications regarding the company's future profit growth rate.

The Lesson of the Markets

It is a given that the crowd usually outsmarts the remnants -- that the contrarian (regardless of the intensity and integrity of analysis) faces an uphill battle because inflection points in markets, economic cycles and of opinion are more infrequent than frequent, more atypical than typical. The contrarian's arguments are typically pushed back (and even ridiculed) by consensus players and the media, most of whom have a vested interest in up not down.

The most important takeaway is that unanimity of opinion often illuminates a dangerous path. When something seems too good to be true, it usually is. This observation might very well apply to the current almost universal bullishness on the part of most investors in which the line of demarcation between progress and fantasy is blurred.

The Lesson of Apple

As to Apple, it remains my contention (as has been the case since late September) that the company's secular earnings growth rate continues to be overstated by Wall Street analysts and investors and that a confluence of factors led to a peak in optimistic sentiment regarding Apple's share price four months ago. That optimism led to an unprecedented flow of funds into Apple's shares, the establishment of unrealistic company share price targets and unattainable profit projections.

As recently as Tuesday, on CNBC's "Futures Now," I surmised that Apple's consensus earnings estimates would move from the high $40s to closer to $40 a share for fiscal 2013. Nothing in yesterday's first-quarter earnings report moves me off of that forecast.

How Now, Apple?

Apple faces its own new normal -- a changing and more difficult business landscape with escalating competition that will challenge profitability over the next few years. The company faces competition in both its mature and emerging markets. Revenue will be moving toward single-digit growth rates and, when coupled with limited upside to margins, will limit future EPS growth.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
DOW 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

Our Tweets

Brokerage Partners

Top Rated Stocks Top Rated Funds Top Rated ETFs