What's eating Apple?
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The question has been asked by nearly every Apple watcher following a brutal two-week stretch that began with a worse than expected earnings report, quickened after the ouster of a high-profile executive and culminated with news this week that it had fallen behind competitor Samsung in the smartphone wars.
For a company that could seemingly do no wrong up until a few short weeks ago, Apple'sdramatic reversal of fortune has jarred numerous analysts. Given that the company's successful updates to its wildly popular iPhone and iPad, Apple seemed poised to dominate that digital wars that pitted it against competitors like Google and Samsung Electronics.
Now, however, the tech giant's once high flying stock has fallen into a bonafide swoon. On Thursday, the shares descended into bear market territory before rebounding modestly on Friday. (Read more: Are the Best Days Over for Apple's Stock?)
Apple's cratering stock price – which hit an all-time high above $700 as early as September – has become a proxy for what some investors think is a declining outlook ahead of the all-important holiday shopping season.
In late October, Apple unfurled its fifth version of the iPhone, nearly a year after the unexpected demise of iconic CEO Steve Jobs. Simultaneously, newly installed CEO Tim Cook wowed market participants with a mini version of its market beating iPad that sold three million units immediately out of the gate. In theory, the company should be riding high. (Read more: Apple Unwraps iPad Mini Along With New, Full-Sized iPad.)
So what went wrong?
"There are obviously some very real issues the company is facing in terms of slowing growth, especially post iPhone 5 product cycle," said Andy Hargreaves, senior analyst at Pacific Crest Securities. "We've seen the first signs of the limits to how high their gross margins can go, which means your profit isn't going to grow the way it has in the past."
Although Hargreaves still maintains an "outperform" rating on the stock, calling it "pretty darn cheap" at its current levels, he identified several chinks in Apple's previously impervious armor.
The technology behemoth, Hargreaves argues, needs "hundreds of billions of dollars' worth of market activity just to continue to grow, and that's probably not going to happen."
Even as he declared the hand wringing over Apple's future as overdone, he said the smartphone market in developed markets has reached a saturation point that leaves only "incremental opportunity" for gains. (Read more: Apple Running Out of New Markets for iPhone, iPad: Pro.)
For nervous investors, incremental may not be enough. Despite a loyal consumer base willing to line up outside its cubic retail shops, Apple CEO Tim Cook is feeling the hot breath of several different competitors down his neck.
What would have been the triumphant launch of its iOS6 software in September quickly became a public relations embarrassment when Apple's popular Maps function fell flat with customers. The fiasco led to the ouster of widely respected software chief, Scott Forstall, just last month.
Douglas Kass, founder of fund manager Seabreeze Partners, told CNBC last week that the company is no longer a buy and that Apple's golden age is over.
With the stock looking increasingly vulnerable, Kass said, "Some of its competitors are growing agile and Apple is losing its first-mover advantage."
One of those heavyweights is Samsung – the Korean technology maker who has been locked in legal skirmishes with Apple for months, and is shaping up to be the tech giant's fiercest challenger in the smartphone market.
On Thursday, research firm Strategy Analytics said Samsung's Galaxy S3 had surpassed the iPhone as the world's bestselling smartphone model. The news heaped more pressure on Apple's already beleaguered stock.
The Galaxy S3 helped Samsung post a record $7.3 billion operating profit in the quarter ended September 30.
"Samsung's Galaxy S3 has proven wildly popular with consumers and operators across North America, Europe and Asia," said analyst Neil Mawston, adding the new iPhone 5 would likely reclaim the top spot for Apple in the current quarter.
Apple's mounting woes have made some warn that the company could face a similar fog of irrelevance that is shrouding both Microsoft and Yahoo! – both companies that, once upon a time, enjoyed dominant market share before falling from grace into an extended period of decline. (Read more: Apple Becoming Like Microsoft? Fears Grow After Miss.)
Yet others believe the gloom might be overdone. Apple's revenues –which it recently forecast would grow to $52 billion – makes its fundamentals attractive enough to lure back skeptical investors.
For that reason, Brian White, analyst at Topeka Capital Markets, thinks the stock could soon vault above $1000 per share once the pessimism lifts.
"It's very reasonable for a company that's growing at this rapid pace," said White recently told CNBC. He called Apple's stock "significantly undervalued", especially given a revenue outlook of $52 billion.
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