Time To Rethink Your Apple Investment?

| About: Apple Inc. (AAPL)

Almost any company would wish to have the kind of performance Apple (NASDAQ:AAPL) has been enjoying for the last five years. Apple's run has been simply amazing and if we go further into the past, almost 10 years ago, we can even find some analysts predicting that Apple would be in trouble and recommending selling at a fraction of current prices. Well, that's fine, we all have our opinions and sometimes we're right, sometimes we're wrong, but the point is the tremendous comeback the company has made since.

I just saw the Apple WWDC event and some questions came to my mind. Because of all the expectations that are currently incorporated in the stock price, I was at least expecting some kind of surprise so that the current $534 billion valuation would continue to make sense. It's not that the products aren't great, they are, but I believe a lot of good things must continue to happen for a long time so that this kind of valuation makes sense.

Unfortunately, at the end of the conference, it just seemed to me that the kind of leap that Apple has managed to make in the past wasn't there. Of course, it's not Apple's fault. I'm no technology expert, but when the iPhone was introduced they had a big advantage to everybody else. It was something new and they made a change in the industry with everybody else trying to play the catch up game. The problem is that it's very hard to keep that advantage and the differences to the competition have been shrinking. Three years ago, you could only do certain things if you had an iPhone. Now, with an iPhone, a Nokia (NYSE:NOK) Lumia 900, a Samsung (OTC:SSNLF) Galaxy S III or any other top of the range Android (Google: GOOG) phone, you can do almost the same with any of them.

It's completely normal for such a situation to arise and for the consumer, it's great that this is the case. But for an investor, it's the opposite. It's important to know what we are paying for, and at this time, I think investors should start considering if they want to stay for the long term or they want to start taking money out of the table.

Like I said before, the past years have been amazing. Since 2008, Apple has managed to increase Net income from $6,119 million to $25,922 million last year, with the company positioning itself for another record this year. You can check the table below to see the kind of performance Apple has been delivering:

2011 2010 2009 2008
Revenue (million) $108,249 $65,225 $42,905 $37,491
Operating Income (million) $33,790 $18,385 $11,740 $8,327
Net Income (million) $25,922 $14,013 $8,235 $6,119
EPS $27.68 $15.15 $9.08 $6.78

But with this performance, the market cap has grown from over $100 billion in 2008 to over $500 billion currently, and even if the company manages to double it's earnings again, it would have to at least earn $50 billion a year for the next 10 years for an investor to recover his investment.

It could be easy, I don't know. But somehow since the new iPad was introduced and now with the WWDC event with only one new product (the new MacBook Pro), it seems to me that the kind of advantage that Apple had is starting to get smaller. The new iPad was basically the iPad 2 with a better display and 4G. The WWDC event was basically an update to the entire range and to the software.

Nothing wrong with that, everything continues to look really good, but the competition is getting closer, and while a few years ago, you probably wouldn't want anything else rather than an iPhone, now there are a lot of options to at least consider and the current valuation may begin to raise some doubts.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.