This morning, I was on CNBC’s Squawk on the Street speaking out in defense of Apple(AAPL) and why I still see tons of growth ahead of the company.  The interview from today is here.  Zerohedge – who I follow on Twitter – tweeted during the interview that I was arguing the “plunge in Apple was bullish.”  I respect Zerohedge and know he/she has been bearish for sometime on Apple. I think one of the reasons is that he believes institutional investors have mindlessly piled in to the name without doing any research and, therefore, are likely to be hurt the moment that people start running for the exits out of the name.  That hasn’t happened yet, though. It probably will at some point. But I don’t think it’s now or any time soon.  There are lots of Apple critics now with it at $550 compared to September when the stock was trading at $705. That’s fine. It’s just the nature of the ebbs and flows of the stock market, especially for a high-profile stock like Apple. People will be most bullish at 52 week highs and most bearish at 52 week lows.  I believe it’s bullish that we have so many folks negative on the stock now with the 20% decline. The fact that you don’t hear as many people pounding the table for it is a solid contra-indicator that now is likely a great entry to the stock.  A year ago, Apple dropped from $425 to $360 – a 15% decline. There was a crescendo of bearishness on stock at $360. Many of the same arguments you hear now circulated then: the magic is gone now that Steve Jobs is dead, they’re they biggest stock in the world, they can’t keep growing at their historical pace, margin concerns, increased competition. I remember more than a few technical traders saying that the stock was clearly showing it was ready to drop to $300 due to technical signals.  Of course, in late November, the stock turned and ran until April – first getting to the $600s and then later this year to the $700s.  Now we have had a 20% retracement from the all-time high in September and there are more than a few bears out there besides Zerohedge, including TheStreet.com’s Doug Kass, and Jeff Gundlach.  If you boil the arguments of the Apple shorts down to their core, it’s this: Apple’s growth is about to massively slow down compared to historical trends and, in fact, may even go flat. Therefore, the stock will contract.  I agree with them that, if that happened, the stock would go backwards.  That’s why Netflix (NFLX) dropped from $300 to $60 last year, because growth expectations got severely cut back. It doesn’t matter that Apple has a P/E of 12x and Netflix’s was astronomical. If Apple started to show next to no growth, it would still see its multiple contract and the stock dropped.  But that’s a big if. I disagree with the Apple bears that this is it for the stock.  I still see enormous runway ahead of Apple.  Yes, iPhone is the foundation of Apple’s valuation because it’s the most important and profitable product. But Apple’s not going to stay selling 25 million iPhones a quarter. A couple of years from now, I expect it to be selling more like 100 million phones a quarter. Samsung is already selling that many smart phones and more limited feature phones a quarter. It’s not pie-in-the-sky to think Apple could get to that level, especially given how half of mobile phone users are still using feature phones. Apple’s global market share of mobile phones is still “only” 15%. And, by the way, iPhone margins have held their ground in the last few years.  I think in the United States we see all our friends using iPhones and think the company’s hit saturation. Yet, the global numbers tell a different story. I’m not trying to over-Nate Silver this, but it’s just math.  We have the critics who think the iPad Mini is just an incremental innovation. They saw a picture of it and don’t like it. Fine. I personally place more weight on reading a Walt Mossberg review of the product, but ultimately it’s not about our opinions. It’s about the numbers of units Apple sells. And I think the early results demonstrate that the Mini is a hit.  In my view, Apple saw an opportunity to growth their market share in the tablet space and – more importantly – make money doing it, unlike most of their competitors. As shareholders, how can you be upset with Apple management doing that? If they hadn’t, we would have criticized them for being overly dogmatic and leaving money on the table.  With the Mini, Apple looks to me like a lock to sell 100 million tablets in 2013. They just passed the cumulative 100 million iPads sold mark recently. There’s still a lot of green space – especially at the expense of PC makers.  And what if the innovation cupboard is bare? What if Apple will have no new products ever? What if they’ve lost the ability to dream up new products now that Jobs is gone?  It’s possible, but I just think that’s not at all realistic and sells all the other talented Apple employees short. I think they’ll prove they can innovate without Steve. But even if they don’t, there’s still great growth potential ahead of the company for at least the next couple of years.  I agree with the critics that there likely will come a time when owning Apple stock won’t be that exciting. They will get too big and/or expectations of future growth will get too far ahead.  However, the music hasn’t ended yet.  In each of the last 8 years, Apple’s stock has pulled back between 11 – 52%. Because Apple’s growth has been so unprecedented for a company of its size, critics have always wanted to call the top tick and claimed the company has hit saturation. Yet, after each of these 8 drops, it’s been followed by a violent move up in the stock afterwards after investors are surprised that the company grew more than they expected.  I don’t know when this current funk that the stock is in will turn. Maybe it will get worse because of the “fiscal cliff” and investors using a large liquid stock like Apple as an ATM for cash, before it gets better. But I think we’re probably close to the bottom for this current pull back.
At one point, Apple's likely to hit saturation in the world.  However, I think the current critics are way too early.