apple investing

Apple Inc. (Nasdaq: AAPL) investors have cringed as the stock slipped about 16% from its peak over the last two months.

But given the absence of any catastrophic bad news, why is AAPL stock tumbling? And where will it stop?

It's important to note off the bat that Apple's fundamentals are just as strong as they were last fall when the stock began its huge run-up from just under $400 to $636.23 on April 9 (it hit an intraday high of $644 on April 10).

In short: Apple still expects to make a mountain of profit this year. Apple still has over $100 billion in cash with no debt. The company's price/earnings ratio is about 13.50 for the trailing 12 months and its forward P/E just 10.

So something else must be driving down Apple stock. Some of it is logical, some of it emotional - but none of it permanent.

Let's take a closer look:

• A Parabolic Rise: First and foremost, AAPL simply rose too far too quickly. Rapid gains beg profit-taking.

"It was clear to me that this kind of reversal was coming - and sooner rather than later," said Money Morning Chief Investment Strategist Keith Fitz-Gerald when the selloff started in April. "The shares had soared 75% in just five months - one analyst actually described the performance as "euphoric.'"

Hoping to expand its reach, Apple Inc. (Nasdaq: AAPL) is testing a store-within-a-store concept with both Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT).

Although both retailers have already been selling Apple merchandise, the new "micro-stores" will expand the current offerings (with the exception of Mac computers) and create a product experience more akin to an Apple Store.

Several dozen more micro-stores are planned, though the rollout will be gradual.

Piper Jaffray analyst Gene Munster said Apple's long-term goal isn't so much to stuff a micro-store into every Wal-Mart and Target, but to place them strategically in rural areas many miles from the mostly urban, wildly successful mall-based Apple Stores.

"We always talk about growth outside the U.S.," Munster said on CNBC recently. "The reality is, just look in our backyard. There's still a growth opportunity that no one's talking about, which is kind of outside the urban areas."

The allure for Wal-Mart and Target is the extraordinary foot traffic Apple products can generate. They're hoping that customers who come to shop for Apple products will stick around to buy other merchandise.

If the strategy works, both Apple and the big retailers win. But, as the saying goes, the devil is in the details.

In fact, Apple is no stranger to what can go wrong with the store-within-a-store concept.