Apple is a bit tricky right now, it is an interesting time for the company.  From an earnings prospective, it would appear that Apple will still be able to grow their revenues with new products (iPad Mini this year and iTV maybe next year?) as well as increased sales in emerging markets like Brazil and China, all the while maintaining the largest profit margins in the industry.  Even if all of a sudden Apple products became un-cool in the U.S. and sales took a huge dive, international markets will still be going nuts for the stuff, so it would take a catastrophic event for Apple shares to suddenly take a significant dive (say, below $500).  (Not to scare you, we are talking worst-case scenario here.)  This is just for hardware, the iTunes store is often overlooked when putting a price on Apple…Q2 2012 revenue was almost $2B x 4 quarters = $8B x 20 years (this is a widely accepted number for a revenue driven valuation) = $160B just in the iTunes store alone.

It would appear that not much has changed since January when analysts had an $800/share target for January 2013.  I hate to sound like everybody else, but what is different is that Steve Jobs is gone (I know - obvious).  Here are the alarming things I have seen in the past 12 months with Apple:

• iOS 6 completely fell flat.  1- They appear to care less about what is best for the consumer and more about distancing their users from Google. Apple took a shot at their own maps program and it is bad (even Mad Magazine is making fun of them), they have a long way to go before it is comparable to Google Maps.  They also removed the YouTube App.  2- Passbook, while a very cool idea, is not receiving the proper support from Apple.  This is a big idea that Apple should be going to work to get people to use.  There are some bigger companies using it; American Airlines (I think?) and LiveNation off the top of my head, but this is a feature that I have been excited to have for a while now and Apple is really neglecting it. 3- Apple had a tracking system built into the OS that sent marketing data back to Apple for iAd targeting.  As an investor, yes, great that Apple is getting valuable data.  As a consumer, I am appalled by a sleazy move like this.
• Retina MacBook Pro was released with screen issues.  Apple was so ancy to get a retina display MBP out the door that they rushed it to market with defective screens.  There was actually a very interesting article in Gizmodo today with a first-hand account of dealing with Apple with regards to this.  Again, I have been told a story where Steve had an extra screw put in on the side of the original macBook simply to be symmetrical; he demanded perfection and the guy saying “no, do it again” is gone.  This was a finance decision….again, borderline sleazy.  Remember when Steve delayed the release of the white iPhone by a year because they weren’t coming out of the factory white enough?
• Something fishy with iTV. It was reported to be released last year and pushed back, there is still no timetable for release.  What many people do not know about this is that the reason for delay is supposedly the software.  Around this time last year, it was “leaked” that Apple was going to push the iTV out the door with a modified version of software that Steve said no to about 2 years prior.  (The former project manager got a look at it and said it was almost exactly what he had been working on that Steve shot down.)  This may be true, it may be a lie, but unless Apple is waiting for the bill of materials to drop before they start selling, I do not see another reason why this product would be continually delayed.  This point could turn out to be incorrect as it is based on rumor and speculation on my part.
• Siri over-promised and under-delivered.  There has not been much development by Apple to remedy this.  This is in part because Siri is a machine learning application (a type of artificial intelligence) and gets better with more data.  I gave it a pass on release and was convinced it would get better; it hasn’t.  I may be getting nit-picky here, but my expectations for Apple are high.
• Microsoft and Google are gaining ground in software performance.  They are still nowhere close in areas like the App Store, music sales, etc…but their software is as good as Apple’s (and in some areas better).  Apple has the devoted customers that will be difficult to draw away, but it could only be a matter of time before people begin to see the convenience of google’s cloud solution or Windows 8’s spectacular integration between laptops and mobile devices.  It should be noted that this is coming from somebody who drinks the Apple cool-aid with no plans to jump ship any time soon.

So, to sum up on Apple.  Do I think they are short-term undervalued? Yes.  They will probably see a nice little jump upon the announcement of the iPad Mini, especially due to a spectacular price point for emerging markets.  However, do I also think that they are fast-approaching a mature company whose mission is no longer to innovate, but is to make incremental supply chain improvements and move just fast enough to stay ahead of the competition.  They are making profit-driven decisions and are losing their identity of delivering the top of the line products.  Steve ran the company like a craftsman designing a piece of priceless furniture; every aspect had to be perfectly detailed, even the back of the piece of furniture that is against the wall and nobody ever sees.  (I am paraphrasing this, it is one of my favorite things that he ever said.)  Keep a close watch in the next 12 months as Apple will either make a turn-around and continue the march toward a $1T valuation, or they will accept their role as a profit-driven giant that sees slow growth, stability, and a solid dividend (which is not necessarily a bad thing).