Just months after Apple's shares broke the $700-per-share barrier, making the company the largest on the planet by market capitalization, the stock is flirting with the $500 level. During Friday's session, the stock traded as low as $505.58, largely driven by UBS analyst Steve Milunovich's lowering of his price target of the stock from $780 to $700. The tepid release of the iPhone 5 in China is not helping matters, either.

As shares continue to slide, it's hard not to remember the cadre of analysts who jumped on the Apple bandwagon, putting $900 to $1,100 price targets on the stock. With the ongoing supply issues leading to reduced sales estimates, should the stock be considered a buy yet? Ultimately, I think Apple is a buy at current levels because even near $500, the stock has limited downside.

A reduced outlook
The Wall Street Journal reported on the impact of lowered expectations: "UBS slashed its 2013 earnings estimate and price target amid concerns about slowing growth and supply chain issues. UBS analyst Steven Milunovich cited some of the firm's Chinese sources who are skeptical that the iPhone 5 will do as well as the iPhone 4s. He also notes the iPad Mini could be cannibalizing the larger iPad." Heading into the holiday season, the performance of various tablets will be a defining factor for many companies, as this is likely to be the year of the tablet. The iPad Mini already is facing significant pressure from competitors on price; it retails for a starting price of $329, relative to $199 for the Google Nexus 7 and others.


News of the tepid Chinese reception for the iPhone 5 comes as a particular blow, given that Apple lost the race to sign an agreement with China Mobile . Last week, Nokia announced that it had signed a deal with China's largest wireless provider to bring its flagship Lumia 920t to the carrier's network. China Mobile boasts more than 700 million users, and the deal represents a significant win for Nokia as it tries to re-establish itself as a serious player in the smartphone industry. Anyone doubting the critical nature of the Chinese market should keep in mind that China saw 47 million smartphone sales in the third quarter of 2012 alone; that represents year-over-year growth of 117%. 

In addition to Milunovich's lowered expectations, Jefferies analyst Peter Misek cuts his first quarter sales estimates for the iPhone from 52 million to 48 million. Misek cited reduced orders from Apple to many of its key suppliers as a catalyst  for his lowered expectations; the shares of many of these suppliers, including Qualcomm and Skyworks Solutions, have traded lower on the news. With fewer iPhones being built, it is safe to conclude that sales will be lower.

Apple's position
To put some of these numbers into context, at Misek's new estimated levels, Apple will still sell as many iPhones in its fiscal first quarter as China sold in the third quarter of 2012. There are two ways to interpret this information, one favorably for Apple and one not. You could see these numbers as evidence that Apple seems unable to sell more smartphones globally than China can sell alone. China is the single largest wireless market in the world, but it's only a single market. Apple's inability to outpace a single market on a global scale directly addresses the fact that, according to IDC, Google's Android controls 68.1% of the global market, relative to 16.9% for Apple.

The other side of this same argument is that at even at 48 million units, Apple is selling a lot of phones before you even consider the tablet market in which the company remains dominant. Again, according to IDC, Apple is responsible for 53.8% of 2012 market share in the tablet segment. When its smartphone sales and tablet dominance are combined, this argument is quite favorable for the future of the stock and the company.

Weighing the risks
When you consider that Apple shares are already down by more than 25% since they reached their recent highs, it is safe to believe that downside risk is limited from current levels. While the company has clearly faced challenges, it is not in jeopardy of disappearing or failing to remain competitive. Even with a reduced price target of $700, the stock has plenty of upside; Piper Jaffray analyst Gene Munster is maintaining his $900 price target  based on strong fundamentals. This is not to say that the stock can't go lower, and that a fall below $500 wouldn't have an important psychological effect on the market. With this in mind, however, the upside for Apple looks stronger than the risks and the stock is a buy.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and, more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

The article Will Apple Really Hit $500? originally appeared on Fool.com.

Fool contributor Doug Ehrman has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, China Mobile, Google, and Qualcomm. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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