Top analyst warns Apple's reality distortion field's on the blink

Wall Street has started to notice there’s something wrong with the circuitry in Apple’s Reality Distortion Field – powered as it was mostly by Steve Jobs’ ego – and shares are tanking accordingly.

Yesterday saw a 3.6 percent drop for Apple stock, and today it plunged a further two percent as trade analysts figure out the company’s Apple 5 isn’t the hot product the world expected. Stuart Jeffrey, for the influential Nomura, shifted his earnings forecasts for 2013 and 2014, noting sales of the iPhone 5 haven’t been up to scratch.

In a note to clients, the Wall Street Journal reports, Jeffrey pointed out the iPhone 5’s sales “really are disappointing so soon in the product’s refresh” – and as a result, said it’s “fair to worry about likely sales volumes in the next few quarters before the iPhone is next refreshed”. This part of Jeffrey’s vision counts on the iPhone 5 being a singular bad apple and puts faith in Cupertino’s drive to innovate in the future.

The reality is, though, there are only so many times customers can be fleeced for what is essentially the same product, and the legal warpath Apple has been waging made it far more enemies than friends. Consumers, meanwhile, are turning to Android devices that have caught up and surpassed Apple spec, with a customisable user experience which is not – yet – under thumb from corporate control freaks.

Of course, this being Apple, shares are still through the roof – but down from the phenomenally over-valued $700 in September 2012. As the WSJ reports, stock hasn’t dipped under $500 since February 2012, but shares have now fallen as low as $489.47.

Jeffrey expects an EPS of $45 and $50 for 2013 and 2014, respectively, which is short of Wall Street’s wider predictions. He warned that margins for the iPhone are “unsustainably high” – and that they certainly will fall, although the timing is tougher to predict. Stock could drop as low as $400, and the analyst is skeptical that even an iPhone 5S or iPad mini with Retina display could materially boost demand.

Its rivals, meanwhile, have probably noticed that, while the widest economic catastrophe in decades, worldwide, rages on, a smarter idea is probably to target customers at lower price points – and they’re buying.