Apple Inc. (NASDAQ:AAPL) has been given a fairly desolate analysis by BMG research. The report begins with a price target of $575 and the following haiku:
Apple’s high margins,
Leave A Door For Cheap Products
Which Are Good Enough
Those three lines sum up the report. The central thesis held by the analyst, Colin G. Willis, is that Apple Inc. (NASDAQ:AAPL) has seen its period of growth, and can now sit back and reap in profits, without much innovation, or growth. That’s a theory most won’t agree with, because there’s little evidence for it, and it means that the world’s most exciting firm will stop being exciting.
Willis asserts that Apple has little to do in terms of phone specs to meet consumers demands. Processor power and screen resolution have reached, or nearly reached, their limits, this will slow down improvements in the smartphone and tablet space. And leaves little room to compete, resulting in the haiku summing up the BMG view of the mobile device market.
This model suggests that Apple Inc. (NASDAQ:AAPL) will continue to dominate the top of the field, because of the high margins its able to command. Weaker products will continue to swarm in and take market share in the developing world and other low price low margin areas.
Apple Inc. (NASDAQ:AAPL), according to the BMG, cannot save itself from this purgatory even by introducing a new product like a television. The company, without diversifying into something very different, is doomed to remain the most valuable company in the world, with little prospects of growth.
An opposite opinion comes from a Wells Fargo analyst who believes that the current malaise in Apple Inc. (NASDAQ:AAPL) share price is temporary, and prices should increase through the middle of the year, eventually hitting back toward its high of $700 per share.
The problem according to the WFC analyst, Maynard Um, is that 2012 was such a great year for Apple that 2013 is a difficult comparison. In 2012, the firm’s two major products the iPhone 4 and 4s, shared very similar components, that widened margins artificially, beyond what could be expected from every generation of the company’s smart phone.
So right now that unfavorable comparison, and the apparently compressing margins, are causing temporary problems for investors. Throughout the year, these comparisons will fade and the price will get a boost as investors get over these hiccups.
The Wells Fargo side of the argument seems to have more going for it than the BMG narrative, but neither is really backed up by a compelling thesis. Apple’s stock price issues have gone on long enough, and many narratives have been placed around the data that it is very difficult to take the word of any analyst.
Despite the almost unacceptable conclusion of the BMG report that Apple has stopped innovating and growing, it is backed up with a haiku. In the current dim world of Apple Inc. (NASDAQ:AAPL) analysis, that gives them the edge in my book.