re ASPs
I'm afraid I still don't understand why a declining ASP is automatically bad, even if the company is increasing unit sales and increasing margin. I suspect someone is guilty of very muddy logic.
As I understand the ASP is the Holy Grail theory you espouse, a decreasing ASP is terrible. So conversely, it would seem logical that if the ASP is increasing that is good for the company. So let us suppose that component costs for some reason skyrocket, labor costs take a big jump, shipping costs are up 20%, and ASPs just doubled... with overall margin falling to 5% from year ago numbers. (Instead of making $100, you are now making $5 on every unit of product sold.) If your yardstick is the ASP, this looks like a heaven-sent opportunity to get fully invested. And if, instead, all of a sudden the ASP is triple and we have negative profit margin, why I expect you to be first in line buying that company's stock.
I admit that my scenario is a bit simplistic and a bit extreme, but logically, where is the error ?
regards, 3. |
