With a market capitalization of $586.9 billion, investors holding shares of Apple (AAPL) may excuse the firm for its negative return in 2015. The stock fell 3 percent in the year, trades at a steeply discounted forward P/E of 9.8 times and a P/FCF of 10 times. The business risks are clear: Apple’s forays into wearables with its watch, streaming music  and headphones is not contributing much to revenue. Despite these troubles, Apple’s iPhone sales continue to do phenomenally well.

A check of the frequency of mentions for “iPad” and “iPhone” in the last quarter show sustained interest for both devices:

(Click on image to enlarge)

Source: www.Tickertags.com

The spike in interest in September followed with the stock price rising from $110 to $120. When Apple failed to hold that level in November, the stock sold off steadily. What is wrong?

Excessive advertising

Apple is displaying popup ads inside their own apps now. It might make sense if Apple promoted the iPhone 6S in the Apple Store, but this should not be done when apps are being updated.

The iOS update to support “3D Touch” quick actions may confuse users. By adding too many features, users lose previous levels of simplicity in the UI. For example, to get a quick look for information, there are at least seven different places to look. This includes the lock screen, Siri, Today View, and Glances.

Users may get alienated if Apple keeps hiding features under layers of menus or swipes.

Design choices supersede functionality

Apple’s “Smart Battery Case” runs contrary to pretty add-on designs released by the company with the case, which extends battery life to 25 hours, featuring a hump that isn't esthetically pleasing. The design is so displeasing that Apple may have a hard time marketing the product.

Bottom line

Apple’s stock is down 21 percent from a yearly high. When it reports quarterly results on January 27, the company must make sure investors that sales of iPhones are stronger than ever. iPad sales are understandably weak. Apple must still show the iPad Pro will compete effectively against Microsoft’s Surface Book and Surface Pro 4. If sales for Pro are weak, investors face more downside with shares of Apple falling further.