My bearish call earlier this month on smartphone and technology titan Apple Inc. (NASDAQ:AAPL) has not yet played out. AAPL stock is up nearly 3% since March 6, which easily bests the negative 1% return of the market as a whole since then.

Besides, a month is only a blink of an eye to a long-term-minded investor. Apple’s prospects over the next few years are far from certain, and the business fundamentals are what will drive Apple (and any) stock going forward.

A recent note from Pacific Crest puts those fundamentals into long-term doubt.

Pacific Crest, which is mildly bullish on shares — despite an “Overweight” rating, they have a price target of just $150, or 4% higher — sees an end to the gravy train, or at least a slowing. “We see potential for further upside to our unit and gross profit dollar estimates in the coming iPhone cycle, but believe growth beyond that will slow substantially.”

I tend to agree.

A key concern for AAPL is the dominance of the Android operating system — the open-source system developed by Apple’s archrival Alphabet Inc (NASDAQ:GOOGL). As of the third quarter of last year, Android boasted a market share of nearly 87% (86.8%), which came despite an embarrassing recall of the Galaxy Note 7. Samsung (OTCMKTS:SSNLF) is the leading manufacturer of smart phones that run off Android.

Apple’s iOS operating system has seen its market share decline over the past year. It ended the third quarter of last year with a market share of 12.5%. The third largest competitor is Microsoft Corporation’s (NASDAQ:MSFT) Windows Phone. Yet its market share was only 0.3% to barely qualify it as a competitor. The rest of the market accounted for the remaining 0.4%.

Despite its seemingly small operating system market share, Apple is projected to report total sales of $228 billion for all of fiscal 2017. Expectations for the next year (2018) stand at $246 billion, or annual growth of 8%. Not too bad for such a large installed base of users.

Yet there are concerns about where future growth in AAPL stock will stem from.

• Apple fell to fifth place in China when it reported its latest quarterly results. Its market share fell to 10.8% from 12% in the previous year. Huawei is the market leader in China.
• Apple is also considered only a bit player in India, where smart phone prices average less than $150. Its market share is only 10th  in India.

Apple changed the smartphone space with the release of the iPhone. It also essentially invented apps that users deploy to play games, access social media and shop.

But tech moves fast, and rivals have quickly gotten up to speed by copying — or should I say emulating — the best of what the iPhone has to offer. Patent litigation is working out the fine line between the two.

The Future of Smartphones

An overview of 10 predicted trends in mobile phones by PC World late last year indicates that new innovations are likely to be incremental, as opposed to revolutionary. It cites new designs, such as slimmer and sleeker iPhones, perhaps a folding smartphone from Samsung, or new customization, such as mixing a phone and watch capabilities.

Chips are getting faster, which helps users access data and services more quickly. USB-C ports are fast replacing micro-USB ports on Android-based phones. Charging is getting quicker, and storage is increasing. Tech moves at the speed of light, or at least tries to.

This will likely make it difficult for Apple to gain any meaningful market share against Android-based rivals. Yet the total market continues to grow, and AAPL stock will benefit accordingly.

Pacific Crest’s Andy Hargreaves seems to think the stock needs a different type of push; namely, “tax reform and a subsequent increase to the dividend may be necessary to drive significant upside” in the stock.

Apple’s forward earnings multiple of 16 is actually quite reasonable. It’s below the market average (closer to 20) and the company is still in a robustly growing market. Yet it is slightly above Apple’s average multiple over the past five years.

In addition to the growth of the overall market, Apple’s higher-margin service revenue is growing briskly. Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.B) has also been accumulating Apple stock. There is no greater vote of confidence than the backing of the Oracle of Omaha.

Bottom Line

It is valid to argue that the strength of iPhone hardware sales is highly uncertain in the coming five years. There is a very good chance that a cheap Android version sweeps across the world — especially in more emerging markets. Back in the day, Nokia dominated the worldwide cell phone market with affordable phones and a massive distribution network.

That makes AAPL stock unattractive at this point.

I still find that Intel Corporation (NASDAQ:INTC) is a more compelling value right now. It has a lower forward earnings multiple below 13 and just bought Mobileye NV (NASDAQ:MBLY) for exposure to chips that are likely to help run self-driving cars.

Alphabet also looks quite appealing. It essentially manages the Android operating system, and dominates the search engine business that has safely migrated to smart phones. GOOGL’s forward P/E is 20, but the firm is growing rapidly. Sales are projected to jump 18% this year to $106 billion.

As of this writing, Ryan Fuhrmann was long GOOGL and INTC.