Other Side of the Slope

AAPL has built up a huge following with its amazing stock performance over the past decade.  Ever since the ipod came out, and then the iphone and ipad, the momentum kept on building.  But in a free market, eventually big profit margins attracts competition, and margins get squeezed.  Unless AAPL comes up with a new product that differentiates it from the competition, they are just another smartphone tablet PC company.  With Steve Jobs gone, that is unlikely to happen.

Eventually, the telecoms will not subsidize AAPL when its not sufficiently attracting new customers.  The cache of owning AAPL is fading fast, as the competition has caught up and surpassed in product quality.  You cannot keep selling the same products as everyone else for higher prices just by sticking an Apple logo on it. 

AAPL has been able to accumulate huge profits because of their big gross margins, the ability to charge more than everyone else and still be able to sell your product.  They were able to do this because their product was superior and unique.  That is no longer the case.  That phase of the company is over.  If they insist on overpricing their products versus the competition, they will keep losing market share.

The next big shoe to drop in AAPL will be the rapid shrinking of gross margins.  If they don't want to sacrifice gross margins by lowering prices, they will have to take a hit on revenues.  Pick their poison, but they will not be able to avoid both scenarios.  

Right now, the majority of AAPL longs are in denial, but AAPL is no longer a growth stock.  It is now a value stock, and those trade much differently.  Going from growth stock to value stock means losing the growth investors and having to attract value investors, who only want to buy on the cheap, and will not chase AAPL higher.  Right now, AAPL is in purgatory, on its way to value hell.