ELI5- How Does 20% Equal “Saturated?"

Apple’s stock took quite the beating in the wake of it’s latest quarterly earnings.  Not because the company’s fundamentals aren’t sound (they’re rock solid) or because they didn’t earn enough money or profit (both set records) but because analysts seem to think Apple has reached it’s peak with nowhere to go but down.

Here’s what I’ve never understood; time and again all we hear is how Android is beating Apple up in marketshare.  So how can it be that Apple has nowhere to grow?

There’s just the great irony of beating up a company for low marketshare while also beating them up for having no growth potential.

Twitter is suffering the same fate right now.  The stock continues to tumble as investors worry about “active user growth” despite the fact that Twitter has plenty of room to grow.

In both cases, I think the Wall Street is making the same fundamental mistake in that they don’t understand the products or the companies.

Now, in Twitter’s case, there’s a strong argument that even they aren’t entirely sure.  But Apple is crystal clear on who they are.  And in both cases, the companies are turning in solid performances.  It’s all about failing to miss outsiders (aka “analysts”) expectations.

Both these companies are perfect examples of why the stock market is such a silly place.  Stock prices are driven by a handful of analyst’s skewed perspectives of what expectations they have for a company.  Often this has no strong correlation to what the company is thinking, doing, or capable of; and that’s just crazy.

So how is it a company with 20% market share is considered to have “saturated” the market?  Because some group think among so called “experts” decided that 20% was the most that company could ever hope to get.  Forget profit, forget performance in real dollars.  Stocks are driven by expectations; not results.  Don’t forget it.