It looks like Apple (NASDAQ:AAPL) hasn’t escaped its China woes after all. Goldman Sachs recently put out a note on Apple stock stock saying that there are “multiple signs of rapidly slowing consumer demand in China” and that this “very weak consumer demand” could lead to weakness in the numbers over the next few quarters.

If Goldman is right and Apple reports unimpressive iPhone numbers over the next few quarters, Apple stock could drop in a big way. Why? Because Apple stock is trading at a big valuation. That big valuation is only sustainable if the company fires on all cylinders. Any missteps will result in weakness in Apple stock. Moreover, missing on iPhone numbers isn’t just any misstep. It is a big misstep — and a big misstep at current valuation levels could spark a meaningful pullback in Apple stock.

But I’m not so sure Goldman is right about this. I still think this iPhone upgrade cycle will be huge, as pent-up demand converges on favorable economics. In a world where Apple reports impressive iPhone numbers of the next several quarters, Apple stock will head higher.

Nonetheless, investors should be aware of the risks. At this point in time, with tech sector sentiment already dampening and rates rising, Apple stock could drop in a big way if iPhone numbers fall short of expectations. As such, I think the best path forward with Apple stock is one defined by cautious optimism.

Why Apple Stock Could Fall If Goldman Is Right

Historically speaking, the valuation of Apple stock is highly cyclical. Apple has forever been a consumer hardware company, and year-to-year demand for consumer hardware products fluctuates wildly. As such, Apple stock’s valuation on a year-to-year basis has also fluctuated dramatically. High highs are followed by low lows, which are followed by high highs again.

Right now, we are at one of those high highs. Apple stock trades at 20 times trailing earnings. That is as high as that multiple has been in essentially a decade. Since 2012, Apple stock has traded with a valuation nearly this big twice before. Both times, disappointing iPhone sales and worries about smartphone market saturation caused the valuation and stock to crater over the subsequent several months.

If Goldman Sachs is right about significantly waning iPhone demand in China, we could be on the verge of history repeating itself. Granted, Apple is diversifying itself away from being a strictly hardware company and now gets a healthy portion of its revenues and profits from the burgeoning software business. But, iPhones are still the majority revenue and profit driver. As such, material weakness in iPhone numbers with Apple stock trading at decade-high valuation levels could result in a meaningful pullback.

Where could Apple stock go? Previous pullbacks of this nature dragged Apple stock more than 20% off recent highs. But, each pullback has lessened in severity due to Apple’s product expansion. Thus, an iPhone related hiccup could reasonably cause a 15% pullback in Apple stock this time around. Recent highs were around $233. Thus, you are talking a potential pullback to just below $200.

Why Apple Stock Likely Won’t Fall

Although Apple stock could drop if iPhone numbers come in below expectations, I don’t think iPhone numbers will disappoint.

Everyone thought 2017 was going to be the big upgrade cycle. It wasn’t. While the iPhone X checked off all the hype boxes, the $1,000 price point scared away most potential customers. After all, at that time, a $1,000 smartphone was unprecedented and ostensibly ridiculous, while edge-to-edge display was an odd novelty and facial recognition a “do I really need this” feature.

Since then, though, $1,000-plus edge-to-edge smartphones with facial recognition have become the norm. If you don’t have one, you feel outdated.

News flash: because the iPhone X upgrade cycle wasn’t that big, there are a ton of iPhone owners globally who don’t have a $1,000-plus edge-to-edge smartphone with facial recognition. Thus, there are ton of iPhone owners globally who feel outdated. Normally, when consumers feel outdated, that is when they want to upgrade, so the desire for upgrades is there this year. Moreover, the global economy is healthy right now, so consumers also have the resources to upgrade.

When sufficient resources converge on big desires, the result is robust demand. That is exactly what will happen over the next several months as consumers buy the iPhone XS and XR in bulk, and this dynamic will ultimately push Apple stock higher.

Bottom Line on AAPL Stock

Trading at decade-high valuation levels, Apple stock is not without its risks. But, at the current moment, the bull thesis is much stronger than the bear thesis, and Apple stock remains an attractive investment.

As of this writing, Luke Lango was long AAPL.