Apple Stock, Too High?
http://bgr.com/2012/11/08/apple-analysis-wall-street/
Everybody knows about Apple. Nearly every college student has some form of an Apple product, be it an iPod, an iPhone, or a Mac. But perhaps apple is doing too well for its own good, according to some Wall Street analysts. In both the past September quarter and holiday quarter, Apple has made record profits, but recently Apple stock is tanking. The author of this article believes Wall Street criticism is to blame, as they provide too-high estimates that only hurt Apple’s stock when they cannot meet expectations.
This current situation falls in line with our study of direct-benefit effects, where the value of a company is influenced by how valuable its consumers and reviewers hold it. In this case, Wall Street analysts continue to increase their expectations of Apple stock, which is raising the consumer’s value and shifting the equilibrium position. As we studied in class, if the current consumer value is higher than the stable equilibrium value, the value will steadily decrease until it is back at equilibrium. This is what is happening to Apple right now; it has succeeded to the point where anyone who wants an Apple product probably already has one, therefore “hurting” future sales. While some are worried over Apple’s “impending demise,” I believe they are worrying a bit too much about nothing, and that after some period of time, Apple stock will eventually stabilize at an equilibrium value.
– Roo