There's Still One Thing That Has To Happen Before Apple Stock Recovers...

Even if you assume that Apple's revenue growth will pause and Apple's profit margin will drop sharply--both of which appear likely to happen--the stock still looks attractive.

Don't think so?

Think about it this way:

If you came up with $400 billion to buy all of Apple, you would be able to drop all of Apple's $150 billion cash in your pocket. This means that, on a net basis, you would only have spent $250 billion. Then you would own a business that generated a staggering ~$40 billion of cash last year. Even if you assume that competitive pressure will cause this cash-generation to get cut in half, the company will still generate $20 billion of cash per year. So you would get all of your cash back within 10-15 years...and you would still own the company.

The only way Apple stock is expensive at this price is if the company has begun an inexorable and devastating decline, like Palm, BlackBerry, or Nokia.

Given the industry that Apple operates in, this horror-scenario is perfectly plausible--there's plenty of precedent for it (including at Apple). But, at least for now, it doesn't seem likely.

So, at $425, Apple's stock seems cheap.

But there is still one thing that likely has to happen before the stock sees a sustainable recovery.

Wall Street analysts have to throw in the towel.

Most stock collapses follow a similar pattern.

• As the stock marches ever higher, everyone eventually falls in love with it and projects that it will go all the way to the moon
• The stock pulls back
• Everyone says it's a "buying opportunity"
• The stock falls more
• Everyone trims their price targets and reiterates that it's a "buying opportunity
• The stock falls more
• Cracks in the fundamentals appear
• Everyone talks about the fundamental issues as though they had always seen them coming, further reduces their price targets, and reiterates the "buying opportunity
• The stock falls more
• The fundamentals get hammered
• Everyone cuts their price targets, and a bold analyst or two downgrades
• The stock falls more
• The fundamentals get worse
• The stock falls more
• Everyone finally gives up (downgrades and radically cuts forecasts) and says that the company is completely and forever screwed and that the stock will never go up again
• The stock bottoms and goes up

We've run through almost that whole progression on Apple.

But we haven't quite reached the end.

Apple's stock has collapsed, Apple's fundamentals have deteriorated, and analysts have cut their price targets.

But, as yet, few analysts have downgraded and fully brought their forecasts into line with the new Apple reality.

And that likely has to happen before Apple finally bottoms and turns up.

Specifically, most analysts still rate the stock "buy," and the consensus earnings forecast for 2013 is for earnings to grow about 10% over last year.

Apple itself has projected that its earnings will fall about 15%-25% this quarter.

So projecting 10% earnings growth for the year seems pretty heroic at this point.

So those earnings estimates still likely have to come down.

And, at some point soon, we should start seeing some apocalyptic assessments and downgrades.

Then, assuming Apple doesn't actually follow in the footsteps of Palm, we should be all set for the recovery.