As Apple Faces Stiffer Competition, Can the Stock Recover?
Samsung launched its latest salvo against Apple in the ongoing war for global smartphone dominance on Thursday. And with BlackBerry's new product, analysts are divided on where Apple shares go from here.
The new Samsung Galaxy S4 boasts a five-inch screen compared to the iPhone's four-inch display and the "Air Gesture," feature allows users to navigate their phone without actually touching the device.
(Read More: Samsung Takes on Apple With New Galaxy S4)
"The fact of the matter is Samsung is coming out with new products more frequently than Apple is and that consequently has led to a significant advantage that Samsung has built upon given strong execution," David Garrity of GVA Research said in a CNBC interview.
Even BlackBerry is making a run at returning to relevance with its new Z10. A BlackBerry partner placed an order for 1 million BlackBerry 10 smartphones this week.
Consumers have had a history of turning quickly and viciously on previous smartphone favorites like Nokia, past BlackBerry devices and the Motorola Razor.
Jefferies analyst Peter Misek told CNBC that based on anecdotal surveys, 15- to 25-year-olds are buying Samsungs and the Galaxy S series.
(Read More: 10 Cool Things You Can Do With Your Smartphone)
"Apple's already lost," venture capitalist Porter Bibb said Thursday. "Samsung has taken over the global market share in terms of smartphones and tablets, and Apple still has a marginal lead here in the U.S., but during the second quarter this year, Samsung will become the market leader here, as well."
(Read More: 'Apple's Already Lost' to Samsung: Bibb)
In 2012, Samsung was able to dramatically extend its lead over Apple in the global smartphone market. According to data from market research firm IDC, Samsung had 30 percent market share versus 19 percent for Apple. In 2011, Samsung and Apple were about equal with 19 percent share.
Does Apple Have the Right Products?
The problem for Apple is it may not have the right phone for the high end of the market. "The high end of the market is 4.5- to 5.5-inch screen," Misek said. "And I don't think they'll have a product in that market until the middle of next year."
In the meantime, Apple could lose market share.
But Raymond James analyst Tavis McCourt told CNBC that there really isn't going to be much differentiation in the form factor going forward. "I don't think there's going to be a big differentiation in hardware from this point forward," he said. What will matter is whether consumers prefer the iOS operating system or the Google Android system.
This week Misek lowered his price target on Apple to $420 from $500, one of the lowest on the Street.
He said that the growing consensus that much of the bad news is already priced into Apple's shares is not reality. While there's a chance Apple misses its March guidance, Misek said, there's a really strong chance it misses the June numbers.
"If I told you they were going to miss by 30 percent to 40 percent their June numbers, I would argue retail investors would head for the hills," he said.
(Watch: Tech Winners Without 'Cool Factor')
The Bull Case
Some analysts are turning more bullish, however, despite the risk that earnings disappoint over the next two quarters.
Walter Piecyk, an analyst at BTIG, upgraded the tech giant to "buy" and put a $540 price target on the stock this week.
While he acknowledged that analysts will continue to take down numbers for the June quarter, he said big investors are starting to look out to a return to growth in 2014.
(Read More: 20 Stocks With the Potential to Pop)
"By not owning the stock you're taking the risk that even though they've got this difficult June, or difficult even March quarter to report, that the stock is still not going to rally on other items that could take it higher," Piecyk said. Positive catalysts could include an announcement about the company's cash pile or a new product, he suggested.
"At this point, the Street went from basically thinking Tim Cook has to provide some revolutionary product to now assuming that he won't even do the obvious things to generate revenue," Piecyk added.
Where Misek is focused on Apple's deficiencies at the high-end, Piecyk said that there's a revenue opportunity in a low-priced iPhone. "I think it is logical that they will find some other revenue opportunities to grow 2014," he said. "If they don't, we're probably looking at a different management team for 2014."
McCourt of Raymond James, who has an outperform rating and $600 price target on Apple, said there is an easy case to be made for the stock to move higher. The iPhone 5S could lead to more upgrades than the iPhone 5 did. Apple could enter lower-end markets, higher-end markets with bigger screens, TVs and watches, he said.
"A lot of things could get revenues re-accelerating over the next 12 to 18 months and if so it's not a stretch to see the stock over $800 in 18 months," McCourt said. "A lot of the performance will depend on what product Apple chooses to launch. It's difficult to predict, but I think the risk to reward is quite positive right now."
Stick With the Arms Dealers?
As Apple and Samsung continue to do battle in the smartphone wars, a better investment strategy may be to invest in the arms dealers instead of the warriors, said Alex Gauna an analyst at JMP Securities.
"It's very difficult to predict who's going to win this war. So we've been recommending playing the arms dealers, the Qualcomm, the Skyworks, that are going to win no matter who wins in this," he said. Both companies are communication chip makers.
He added that Samsung has just set a very high bar for Apple to match. Gauna, who has a "market perform" rating on Apple, expects a new version of the iPhone 5 as well as a device that will work on the China Mobile network.
"Again, we're expecting Qualcomm and Skyworks to come out winners when those phones are announced," he added.
—By CNBC's Justin Menza
Additional News: Samsung, Blackberry and Apple Gear Up for Big Mobile Year
Additional Views: Apple vs. Samsung—Size Matters: Blodget
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Disclosures:
David Garrity and his firm own Apple stock; Raymond James makes a market in Apple securities; Walter Piecyk and BTIG had no conflicts to report.
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