It will be interesting to see how investors and analysts ultimately process Apple's (Nasdaq:AAPL) fiscal third quarter miss. This is not the first time that the company has missed expectations or rattled investors, and it seems like the investment community is so focused on the next iPhone launch that this hiccup in performance doesn't amount to much. Apple still presents a very interesting conundrum in valuation - today's price seems to discount an erosion in sales growth and/or margins that nobody is willing to publicly discuss or put into print.

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Third Quarter Earnings Look Much Less Bulletproof
Apple's performance this quarter was much more like a regular tech company, but so long as the next iPhone launch lives up to expectation, it won't matter much.

Apple's revenue this quarter was 23% higher than last year, but down 11% sequentially. Although this number beat the company's own guidance, it was below analyst expectations due to softer iPhone and Mac performance.

iPhone revenue fell 28% from the second quarter, as both units and ASPs eroded. PC sales were likewise soft (down 3% sequentially) as price deterioration mixed with flat unit shipments. Last and not least, iPad revenue jumped 39% from the prior quarter as very strong unit growth outweighed slight ASP pressure.

Margins also softened this quarter. Gross margin plunged more than four points sequentially due in part to a higher percentage of iPads in the revenue mix. Operating income dropped one-quarter as SG&A spending added to the gross margin pressure.

SEE: Earning Forecasts: A Primer

More Pressure on the Next Launch?
Apple's iPhone sales were disappointing this quarter, and management acknowledged macro pressures in Europe. It also looks like customer anticipation of the next iPhone is holding back sales and letting Samsung gather some momentum in the higher ends of the smartphone spectrum.

We ought to know relatively soon how much any of this matters. If the next iPhone launch is another blockbuster, then I suspect most investors will adjust expectations to a tit-for-tat market share trade-off between Apple and Samsung across launch schedules, though maybe with some acknowledgment of slowing growth. After all, Research In Motion (Nasdaq:RIMM), Google's (Nasdaq:GOOG) Motorola and Nokia (NYSE:NOK) continue to struggle to show relevancy in this market, particularly at the high end.

The downside, though, is that maybe saturation and economic factors matter now. Although I don't think carriers like Verizon (NYSE:VZ) can really push back effectively against Apple, another recession could. While this is a market with rapid refresh cycles, it's not completely insulated from macro factors.

SEE: A Primer On Investing In The Tech Industry

Will the Taxman Cometh?
I do wonder if Apple will face external pressures to "do something" with its huge cash hoard. Section 531 of the tax code ostensibly penalizes companies for holding excessive cash balances, and I'm not sure how Apple can claim it needs over $100 billion in cash on hand. While Section 531 is supposed to apply to companies that are hoarding cash to help shareholders avoid paying tax (it taxes the excess retained earnings at regular rates, plus a penalty), I'm not sure that really applies here. Nevertheless, there have been rumblings in Congress to punish companies for hoarding cash and if these rumblings bear any fruit, Apple may find itself forced to act against its own long-term wishes in regards to its balance sheet and cash management policies.

The Bottom Line
With Microsoft (Nasdaq:MSFT) getting directly involved in the tablet market and pushing manufacturers hard on Windows Phone 8, maybe Apple is going to see increasing competition in the coming years. Even if Microsoft cannot manage a rerun of the PC-vs-Mac dynamic of the 1980s and 90s, eventually this market will get more commoditized, as does every consumer market. However, as companies such as Coca-Cola (NYSE:KO) and Nike (NYSE:NKE) have demonstrated, that's hardly a death knell for solid margins, returns or valuations.

Apple's valuation is an interesting case study in that analysts can say or write whatever they want, but the market will do what it will do. To wit, I haven't seen a sell side analyst project anything like the low single-digit (3% or so) free cash flow growth that today's valuation suggests. Even if Apple can only grow free cash flow as fast over the next 10 years as Coca-Cola has over the past decade, these shares would be meaningfully undervalued.

At the time of writing, Stephen D. Simpson did not own shares in any of the companies mentioned in this article.