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?
Rather than having a tight group of bold estimates for profits and sales, I expect Wall Street estimates for Apple to diverge. Below is a good illustration of this; check out the difference in Apple revenue forecasts (2013-2014) between Morgan Stanley's analyst (low and realistic) and Piper Jaffray's analyst (high and unrealistic).
I expect that the hockey stick earnings progression seen over the past three to five years (from $9 a share to over $40 a share) is a thing of the past. Price targets and earnings estimates for the company remain far too optimistic, and expectations will begin to be reduced in the period ahead. Reflecting slowing growth coupled with still strong free cash flow generation, Apple's investor base will continue to change from growth investors to a more value-based constituency. As such, an obvious maturing in its business cycle will produce a diminished valuation and continued share price volatility as the investor base evolves and changes. Though investor sentiment has turned abruptly negative over the near term (and has begun to discount my concerns), there remains few positive short-term catalysts for Apple in the months ahead. As I surmised in my " 15 Surprises for 2013," Apple's shares will likely continue to be under pressure in the first half of this year. Bottom line: Apple's stock remains a trading sardine not an investing or eating sardine. As such, there will likely be numerous trading opportunities, but it is still too early to be a long-term investor in the shares -- there are simply too many headwinds.