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Apple needs more than a new iPhone

September 11, 2012: 12:17 PM ET

Apple's stock fell slightly last October after CEO Tim Cook unveiled the iPhone 4S. Will the same thing happen once the iPhone 5 is introduced?

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.

Apple is likely to unveil the iPhone 5 on Wednesday. The new phone is expected to have a bigger screen and to support 4G wireless technology. But even if the iPhone 5 also cures cancer, leads to everlasting peace in the Middle East and sends humans to Mars, investors will probably just shrug and say that all the news was "priced in" to Apple's stock.

Shares of Apple (AAPL) barely budged on the days of its last major product announcements. On March 7 of this year -- the day Apple introduced the "new iPad" -- the stock rose marginally. On October 4, aka the birthday of Siri and the iPhone 4S, shares fell modestly.

For anyone who wants to suggest that the underwhelming response to new products is because current CEO Tim Cook lacks the stage presence of Steve Jobs, consider this: Apple's stock rose less than 1% when Jobs debuted the iPad 2 on March 2, 2011. And after what turned out to be one of Jobs' last big presentations before he passed away last fall, shares of Apple fell following his launch of the iCloud service on June 6, 2011.

Related: 3 big features the iPhone is missing

Could this time be different? Perhaps. It's worth remembering that one reason Apple "disappointed" investors with its last two announcements is because Wall Street did expect more ... even if it was just a product with a different name.

The conventional wisdom last October was that Apple was going to introduce the iPhone 5, not a slightly souped-up iPhone 4 with a voice assistant who sounded like the female equivalent of HAL from "2001: A Space Odyssey." This March, people thought the next iteration of Apple's tablet would be a more revolutionary iPad 3 as opposed to the more mundane sounding (and ripe for Coca-Cola-esque branding miscue mockery) "new iPad."

But since the shadow of the number 5 ("Number 5 is alive!") is featured in Apple's invitation for tomorrow's event, it seems safe to say that Apple is not going to merely introduce the iPhone 4s2 or the "new iPhone." And the Apple product rumors are never completely correct, so Apple probably will wow the iFaithful with some of the smartphone's new features.

However, as Apple's stock climbs higher and higher, it's harder for new products to immediately move the needle. Apple's stock is up nearly 65% this year. Even though the stock is still trading at a relatively reasonable valuation, it is no longer dirt cheap at 15 times fiscal 2012 earnings estimates. How much more can shares of a company with a market valuation approaching $625 billion be reasonably expected to climb?

The biggest challenge for Apple going forward is that it has to convince an increasingly skeptical Wall Street that it can come up not just with improved versions of already popular products but entirely new categories every few years or so.

Just as the iPod begat the iPhone and then the iPad, investors may be  unsatisfied unless/until the long-rumored iTV comes out. A smaller iPad Mini to compete with the likes of Amazon's (AMZN) Kindle Fire may not qualify as a bold move. But changing what we expect from television sets -- and how we view and interact with video content in general -- could be the next market segment for Apple to disrupt and ultimately define.

Related: A TV is not Apple's last, best hope

Now don't get me wrong: Apple remains a great company. But much of the mystery is gone. Investors are wise to the fact that Apple's earnings are growing like a weed and that the company's guidance for future profit and sales growth is typically very conservative. So Apple earnings "surprises" are no longer all that surprising ... unless the company both misses forecasts and cut its outlook like it did in July.

It's hard to convince those who don't already own the stock -- either individually or through a variety of index-oriented or actively managed mutual funds -- that now is the time to jump in and not worry about things like valuation, competition and, dare, I say it, approaching maturity.  Now that Apple is paying a dividend, it's already enticed a new crowd of income-seeking investors to purchase the stock.

Does this mean that Apple's best days are behind it? Of course not. Shorting the stock is about the dumbest thing imaginable for an investor to do. Apple's stock has obviously recovered from an initial lack of enthusiasm about new products over the past two years. Consumers around the world have bought those "disappointing" iPhones and iPads like hotcakes.

But it's time for Wall Street to reluctantly acknowledge that Apple's stock can't continue to appreciate at the kind of pace it has for the past few years forever ... especially if investors have to wait longer and longer for really innovative new devices and not just updates of existing (albeit insanely profitable) products.

"Apple is continuing to grow quickly. Can it do so for the short-term? Yes. But will it do so indefinitely? No," said Kate Warne, chief investment strategist with Edward Jones in St. Louis.

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Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

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