Why Apple's Stock Can Rally On (and Why It Might Not)

Apple's (AAPL) stock has risen 54% in the past year, more than four times as much as the Nasdaq's 12% gain. In the week since Apple closed its fiscal year on Sept. 30, things have looked only more bullish for the company. Analysts emerged one after another to raise estimates and price targets on the stock, revisions that helped Apple finish last week at yet another record high, closing at $294.07 on Oct. 8.

As Steve Jobs & Co. prepares to report its fiscal fourth-quarter earnings next Monday, Oct. 18, one has to wonder: Is there really room for Apple to rally further from here? After all, when Apple CFO Peter Oppenheimer said he expected revenue in the quarter to rise 47% to $18 billion, analysts couldn't believe it. Apple normally lowballs its guidance, giving it room to beat estimates handily.

Analysts have since come around to thinking Oppenheimer's forecast may not be so crazy, thanks to strong sales of iPhones and iPads in the quarter.

But what about what comes next? What factors can push Apple to keep improving on its financial performance? And what could slow down the stock's relentless rise? Here are six things -- four positive, two negative -- that could help determine Apple's price in coming months. First, the positives:

The iPad goes global.Remember how the iPad was received on its overseas debut (the lines at the Louvre were longer to buy iPads than to see the Mona Lisa)? That was just the start. Bernstein Research estimates that Apple will sell $20 billion worth of iPads next year, the bulk of it outside the U.S. Now remember that Apple is expecting $18 billion in total revenue this quarter. That means, only a year after its launch, the iPad could contribute a quarter of Apple's total revenue. That's a lot of growth.

The iPad has no viable competitor. Apple debuted the iPad in January to a lot of skepticism that it would be a hit. The naysayers were wrong, of course, but the skepticism may have helped Apple by slowing the introduction of rival tablets. One potential contender, Samsung's Android-powered Galaxy Tab, arrives this week, but early reviews suggest price and other factors may slow adoption. Microsoft's (MSFT) promised tablet looks like an even harder sell.

So, Apple is heading into the holiday season without a rival tablet to seriously challenge it for room under the Christmas tree. And of course, this will be the first holiday season when tablets will be eating market share from netbooks and other laptops.

Apple's brand is rising.Jobs has never designed gadgets with an eye to what the tech press will think. He imagines how the consumer will react. The love is being returned. Last month, the American Consumer Satisfaction Index said consumers gave Apple satisfaction score of 86, its highest score ever and nine points above the next computer brands, Dell (DELL) and Hewlett-Packard (HPQ).

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Apple's mobile phones are highly profitable. Apple sold 17 million handsets in the first half of 2010, or about 3% of the total. But according to Canaccord Genuity, it accounted for 39% of the mobile-handset industry's profits in that period. That suggests two things: Consumers will willingly pay a premium for Apple phones, and competitors must sell on price.

Of course, not all the forces at play are positive. At least two negative factors that could take some air out of Apple's rally:

The iPhone may be stuck with AT&T. It seems every month brings reports that Verizon (VZ) will sell the iPhone, and October is no exception. The deal has been slow to happen for a few reasons: Carriers like to tweak the phones so they can sell customers more services, and Apple has resisted giving up control. And Verizon's networks aren't optimized yet for the speed that iPhones can deliver. Verizon may not be able to offer some of the multitasking functions iPhone users have on AT&T's (T) network.

But Apple needs Verizon and other carriers to broaden the market for the iPhone in the U.S. It can't afford anymore to be complacent about phones that run on Google's (GOOG) Android mobile operating system, which have been quickly gaining market share. So, the iPhone could have a bumpy debut on Verizon, or it could be delayed much later than many are expecting.

Apple TV may not take off. Apple keeps tinkering with Apple TV, its project to jump from handheld gadgets to living-room entertainment centers. Google, Netflix (NFLX) and others are also gunning for the longstanding goal of merging TV with the Internet. But it's all up for grabs. Which means the huge lead Apple has in digital music through iTunes might not be replicated in digital video.

One more thing to consider in assessing where Apple's stock goes from here. It currently stands at 22 times historical earnings, compared with the S&P 500's ratio of 18. That's not outrageously high for a company with revenue growing close to 50% a year.

Although the positives appear to outweigh the negatives at this point, never forget: The unexpected can always waylay the best argument for any scenario.