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Don’t Buy Raw Apple Inc. (AAPL)s

Although Apple Inc. (NASDAQ:AAPL) is trading at just over $400 per share — and down considerably from its 52-week high of over $700 — many may say that the stock is trading at ridiculously cheap levels. However, when taking a much closer look at the company’s fundamentals, this is simply not the case.

While it may be easy to be lured in by this recent dip in the share price, the truth is that Apple is actually facing some very serious, and potentially harmful, issues — and this could greatly affect the share price negatively in the near future.

Why Apple may seem to be a good value

At first glance, shares of Apple Inc. (NASDAQ:AAPL) would appear to be a good buy. After all, the company’s P/E is below that of the overall market average — signaling that the share price has room to grow. In addition, Apple has done a good job of piling a large amount of cash reserves.

Yet, since the fall of 2012, Apple Inc. (NASDAQ:AAPL)’s shares have looked like a bargain — even though they were trading in the $500 to $600 range. An investor who bought in at that time on the basis of obtaining a “cheap” stock has likely lost a great deal of money in the process. The lesson here may be that cheap price still doesn’t always represent a great value.

Numbers may be too deceiving

There are also those who lean more towards technical analysis when making a determination about which stocks to buy and sell. Given the case for Apple, the numbers would likely paint a rosy red picture. But here again, it is easy to be deceived.

Because a company’s hard-numbered financials are always representative of how that company performed in its past, tomorrow’s share price of even the best performing company yesterday could still plummet on bad news today or tomorrow. Investors must always remember that “past performance does not guarantee future results.”

In Apple’s case, the low price-to-earnings ratio is based on the company’s past profits — which is essentially very unlikely to be repeated going forward. In addition, Apple Inc. (NASDAQ:AAPL)’s low forward P/E ratio is much more likely based upon way too optimistic future earnings projections. Following this logic, investors who dive in based on these numbers alone are likely to be disappointed.

Apple is getting lost in the crowd

To add fuel to the fire, Apple — the company that produces highly unique and sought after products like the iPod, iPad, and iPhone — has recently fallen into more of a mediocre role where consumers have a choice in which company they purchase their device from, oftentimes at a much reduced price elsewhere.

Morphing into more of a “me too” product producer that, in all likelihood, will need to lower its product prices to stay competitive is also likely to push the quality of its products up — thus reducing the gross margin and possibly also the share price — of Apple down ever further.

Pointing fingers at competitors

One of the biggest reasons that Apple’s products are no longer the “best thing since sliced bread” has come from the introduction of Android devices. In fact, some may even say that Android has obliterated the iDevice kingdom altogether.

While Apple Inc. (NASDAQ:AAPL)’s snazzy iPhone was at one time believed as the best smartphone available, consumers now know that this is no longer the case. In fact, there is not only a wide variety of Android devices to choose from — but many other devices can outperform the Apple iPhone today.

On top of that, companies such as Google Inc (NASDAQ:GOOG) — with its Nexus — and Samsung‘s Galaxy phones are offering similar or better capabilities than the iPhone.

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