Apple (NASDAQ:AAPL) dominated the first decade of the millennium as a technology giant, but the revolution it started is beginning to shift against it, according to Sector & Sovereign Research analyst Paul Sagawa.
Why Does Sagawa Predict a Moment of Reckoning for Apple?
“Apple is at a crossroads,” Sagawa wrote in his research note, according to Fortune. “After dominating the first decade of the millennium, the revolution that Apple started is shifting against it. The iPhone, with its single annual update and super premium price, has been run down from behind by a pack of rivals with segmented product ranges, six-month product cycles, and aggressive price points.”
Our 20-page proprietary analysis of Apple’s stock is ready. Click here and to get your Cheat Sheet report now!
According to the analyst, Google (NASDAQ:GOOG) Android phones now outsell Apple 5 to 1, and the still-dominant iPad could be on the same path soon as “rivals subsidize device sales in pursuit of e-commerce and advertising.”
The analyst posted his note on November 19, the first trading day after Apple’s share price hit a nine-month low, Fortune said.
CHEAT SHEET Analysis: Can Apple Keep Up Its Excellent Relative Performance Versus Peers and Sector?
According to the analyst, Apple “caused a paradigm shift and reaped a windfall, but now faces strategic challenges that will require changing the company DNA.”
While Apple has worked on accelerating its refresh cycles and has even broadening its product line, all that has only slowed down its market share losses. But in turn, margin erosion has accelerated. In addition, Apple’s “Thermonuclear War” on patent protection is a “costly and ineffective distraction” and Sagawa is of the opinion that cross-licensing agreements are beneficial to shareholders in the longer term.
Do Apple Investors Need to Worry?
Sagawa highlighted several challenges, but did not stick to the pessimistic note all through. According to the analyst, if there is any company that can rise to this challenge, it’s probably Apple, “which rose from the dead some 15 years ago.”
According to the analyst, Apple seems to have “recognized its vulnerability and it has management talent, business momentum, and its prodigious cash hoard to help it succeed,” which means there is a reasonable case that Apple is worth the risk in the long term.
As Sagawa wrote, “if Jeff Bezos can convince the equity market to wait patiently for Amazon’s (NASDAQ:AMZN) profits, perhaps Tim Cook can do the same for Apple.”
Don’t Miss: Apple is China’s Tablet King.