AAPL in “Catch 22” on the stock market according to analyst

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We’ve been reading and hearing a lot about Apple’s steady decline on the stock market ever since the iPhone 5 was announced back in September. In fact, AAPL value has dropped from over $700 to around the $450 mark in little over 4 months. And, despite announcing record revenue and sales last quarter, the profit margins showed little to no growth over the year ago quarter. This in turn lead to investors becoming hesitant to hand over any cash for Apple stock, and it’s growth that’s vital in Wall Street.

According to one analyst, Benedict Evans (a consultant for Enders Analysis) Apple has arrived at a Catch 22 situation where any news is ultimately bad news. If it releases a cheaper iPhone in the emerging markets, it’ll become overly saturated leaving little room for growth, which isn’t good. He explains it like so:

“How many more people are left who can buy a $650 phone (or even a $400 one) every 24 months? Is growth almost over? This in turn leads inexorably to the much argued-over ‘cheap phone’ issue, and how margin-dilutive such a phone might be. 

As an investor, therefore, are you buying a company with high growth and continued high profits, slowing growth and the same high profits, or the same growth and (due to cheaper products) lower profit? It really isn’t clear. More cynically, this is a catch 22: high numbers mean saturation (bad), and low numbers mean slowing growth (bad).”

Essentially, unless Apple breaks in to a new market with something incredibly innovative, it’s hard to see how that company’s value will grow on the stock market regardless of how much revenue it pulls in. If margins stay flat, investors won’t invest. Simple as that. Which begs the question? What should Apple release this year to regain Wall Street’s confidence? A TV, glasses, a watch? Let us know your thoughts in the comments or tweet me.

Source: Ben-Evans
Via: BGR

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  • Bratty

    Just to beat the dead horse, last quarter: Microsoft revenues: $21.46 billion. iPhone revenues: $30.66 billion. Yes, just iPhone. (From SG Siegler)
    If this is not evidence that the stock is manipulated to fool the everyday investor, then you should stay away.not be investing in the market. Institutional investors play this game everytime.