This Would Make Me Sell Apple Stock

Apple has been one of the best performing tech stocks over the last year. Although it had a market cap of around $400 billion last February, shares still managed to rise more than 70% in the last twelve months. The rally has been prompted by a string of impressive earnings reports, and a commitment to capital returns. In January, Apple reported the single best quarter in corporate history, earning $18 billion on stronger-than-expected iPhone sales.

But what factors could bring the rally to a halt? What developments could turn Apple into a sell?

Below, three Motley Fool contributors offer up the developments that would entice them to consider selling Apple stock.

Bob Ciura (Even more reliance on the iPhone): As an Apple shareholder, I was as pleased as anyone to see the company absolutely crush its first-quarter earnings. Revenue grew 30% year-over-year, to $74.6 billion. Not surprisingly, this was due largely to the huge success of the iPhone 6.

Amazingly, Apple sold 74.5 million iPhones last quarter, up 46% from the same quarter the previous year. This is truly impressive, but I'm concerned that Apple may be overly reliant on the iPhone. While the iPhone continues to hit it out of the park, some of Apple's other products are striking out. For example, sales of iPads fell 18% last quarter, continuing a disturbing trend. It's reasonable to think that the larger screen on the iPhone 6 Plus is contributing to falling iPad sales. Now that consumers can get their hands on a large-screen iPhone, some may be less incentivized to buy both an iPhone and an iPad, since they may be able to get by with one instead of both.

To get an understanding of how vital the iPhone now is to Apple, consider that the iPhone constitutes approximately 68% of Apple's total revenue. Apple now derives more than two-thirds of its total sales from a single product. To be fair, the Apple Watch will help provide an additional revenue stream, but even if Apple's smart watch sells well, it will still be highly dependent on the iPhone. Should Apple's revenue continue to be increasingly concentrated in one device, I would strongly consider trimming my position.

Joe Tenebruso (Inability to sell the iPhone in emerging markets): Apple is a core position in Tier 1, the real-money portfolio I manage for The Motley Fool. I have no plans to sell the company, but -- as with all my investments -- I continually look for ways to disprove my investment thesis. I study the bear cases that I come across in an attempt to discover evidence or analysis that causes me to rethink my own assumptions and viewpoint. This helps me to identify risks that I may have overlooked.

One risk to my investment in Apple was brought to my attention by Fool analyst Tim Hanson several years ago during one of our stock discussions. Tim's concern was that iPhone sales would be much harder to come by in international markets where average incomes were (and remain) much lower than here in the U.S. I factored Tim's view into my own analysis, and lowered some of my growth projections for Apple in emerging markets. Yet I decided that at the price Apple was trading at the time, Apple was still likely to be a good investment from that point forward. I purchased shares in Tier 1, and the stock has been a strong performer since that time.

But Tim's argument was valid then and remains valid today. There will likely come a time that Apple saturates the developed markets of the world and runs into the difficult challenge of growing iPhone sales in areas where consumers have far less purchasing power.

When that will happen remains uncertain, but I've looked for clues that would help me answer that question ever since Tim first brought it to my attention. That's because the iPhone remains far and away the most important driver of Apple's business. And should Apple's iPhone sales stagnate, and especially if they decline significantly -- whether it's for the reasons Tim and I discussed or because of other, yet-unseen factors -- I would consider selling my shares of Apple.

Sam Mattera (New products disappoint):Apple can't depend on the iPhone forever. Eventually, it seems likely that the market for high-end smartphones will become saturated, demand will stagnate, and growth will depend on other products. Apple has other products, including the iPad and Mac, but both have been around for years, and neither has shown an ability to offer up the same sort of explosive growth as the iPhone.

Apple may need new products to continue growing. The first of these -- the Apple Watch -- will come later this year. Other widely rumored devices include a larger iPad, a television set, and even an automobile. Die-hard Apple fans will almost assuredly purchase them, but will they have the same sort of broad-based appeal as Apple's handset? Given that it requires a paired iPhone to function, Apple Watch sales may never overtake the iPhone, but the business could become a nice growth driver. Cars and televisions -- which are more expensive and less often replaced -- present even more monumental challenges, but may likewise be necessary to keep expanding Apple's top line.

If Apple's new products prove disappointing, it may be time to sell.

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Bob Ciura owns shares of Apple. Joe Tenebruso has no position in any stocks mentioned. Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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