Don’t expect Apple’s slump to last – history points to huge earnings growth following dip

If you spoke to any market analyst/expert at the beginning of this year, you’d most likely have heard the phrase “first 1 trillion dollar company” or “$1,000 share price” when discussing Apple’s financial future. It was all looking rosy for Cupertino until we hit the end of September. Since then the company’s stock hasn’t stopped falling in value, dropping below 600 for the first time since the summer. With that being the case, you could be worried that our favorite manufacturer has hit its peak. Asymco analyst, Horace Dediu states:

One could even say the worse the bear, the better the growth. Sounds completely counter-intuitive, but there is some perverse logic in this as well. The market reflects crises (as well as over-abundance) of confidence. Unforeseen growth is what creates wealth and the crisis in confidence is a reflection of the improbability of continuing out-performance. When Apple’s performance is foreseeable the stock moves slowly upward. When its performance is unforeseeable the stock moves dramatically downward.

A pithy way of putting it is: No news is good news. Good news is bad news.

When a product is understood the stock is mildly desirable. When a new product appears the future is hazy and the stock is undesirable. But that haziness hides potential but up and down. New products is what innovators produce. Bizarre new products is what disruptors produce.

In other words, the paradoxical observation in the chart above of “the more drama in the market, the more success in the marketplace” makes sense when inverted.

For disruptive companies, it should be “the more success in the marketplace, the more drama in the market.”

In that sense the current downdraft may be quite auspicious.

In essence, because everything looks bad for Apple right now means that actually, things could not  be better, especially with the huge popularity of its iOS devices. iPhone 5s are still selling like heated buns, the iPad had its best weekend every when the iPad mini and 4th gen went on sale. Plus, it’s the holiday season. Everyone and their dogs will be buying something Apple branded in time for Santa to arrive.

Via: Fortune, 9to5Mac

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