NEW YORK (TheStreet) -- Investing in Apple (AAPL - Get Report) now requires a lot of courage. But if Apple can overcome three key hurdles, the stock will once again prove its mettle and have unlimited wind at its back. Target price: $130 and higher by May 2015.
Here are the key obstacles investors need to worry about: First, Apple hasn't released a "brand new" product in several years, and its best-selling iPhones, iPads and Macs have reached or are approaching their market-share limits.
Second, the long-rumored iPhone 6 and fabled iWatch are just mirages so far. Although most analysts are optimistic that these two products will eventually manifest in a big way, they could still disappoint consumer expectations.
Last, Apple faces strong competition from Google's (GOOGL - Get Report) many Android allies in the global market (Samsung, LG, HTC and Sony). Android-powered smartphones are currently No. 1 in worldwide growth, grabbing 81% of market share in first-quarter 2014 vs. Apple's 15%, according to the International Data, a marketing research firm.
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So, why think Apple can triumph over these intimidating barriers? Look to its ever-evolving i-ecosystem.
Apple reported its third-quarter earnings last month, and the results were in line with what most analysts expected. Earnings of $1.28 per share were 5 cents better than the Capital IQ consensus estimate of $1.23. Revenue also rose 6.0% year on year to $37.43 billion vs. the $38.02 billion consensus. The company issued downside revenue guidance for the fourth quarter, forecasting revenue of $37 billion to $40 billion vs. $40.46 billion estimates.
The language that CEO Tim Cook used was predictable: We see some growth here and slowdowns there (primarily in iPad sales). Developing countries like the BRICs (Brazil, Russia, India, and especially China) are keeping iPhone sales high, and we have some "exciting" products in the pipeline.
Let's say Apple does debut a splashy, large-screen iPhone in September (the same launch month for all previous iterations). It will be a game-changer.
Most consumers judge phones by screen size and high-tech bells and whistles such as HD cameras and faster processors. A large-screen iPhone with a fast processor would close the size gap between Apple and its Android rivals and attract huge demand.
As for Google, the Android team is analogous to the European Union, which is united by the euro. But in this case it's an operating system, cannibalized by its brother-and-sister brands.