What is an 'Inflection Point'

An inflection point is an event that results in a significant change in the progress of a company, industry, sector, economy or geopolitical situation and can be considered a turning point after which a dramatic change, with either positive or negative results, is expected to result. Companies, industries, sectors and economies are dynamic and constantly evolving. Inflection points are more significant than the small day-to-day progress typically made, and the effects of the change are often well known and widespread.

BREAKING DOWN 'Inflection Point'

Based on mathematical charting models, the inflection point is where the direction of a curve changes in response to an event. In order to qualify, the shift must be noticeable or decisive and attributed to a particular cause. This principle can be applied to a variety of economic, business and financial information, such as shifts in the gross domestic product (GDP) or changes in security prices, but it is not used in reference to normal market fluctuations that are not the result of an event.

Andy Grove, Intel's co-founder, described a strategic inflection point as "an event that changes the way we think and act." Inflection points can be a result of action taken by a company, or through actions taken by another entity, that has a direct impact on the company. Additionally, inflection points may be caused by intentional action or by unforeseen events.

Events Marking Inflection Points

Regulatory changes, for instance, could lead to an inflection point for a corporation that was previously held back by regulatory compliance issues. Inflection points in technology include the advent of the Internet and smartphones. Politically, an inflection point can be illustrated by the fall of the Berlin Wall or the fall of communism in Poland and other Eastern Bloc countries.

Certain unforeseen events can include major economic downturns, such as the financial crisis of 2008, or natural disasters that affect a particular business or industry in a meaningful way. In this regard, an inflection point may not be identifiable until after the event has occurred and a change in direction has been subsequently noted.

Implications of the Inflection Point

When an inflection point is identified, it is often a sign that the affected industry must make certain fundamental changes in order to continue to operate. For example, with the introduction of the smartphone, other mobile technology manufacturers had to adapt to the changing market conditions in order to remain successful.

Palm Inc., the manufacturer of the Palm Pilot personal organizer, attempted to adjust to changing market conditions through the release of the Palm Trio smartphone but was ultimately unable to compete with stronger industry competitors such as the Blackberry offered by Research-in-Motion Limited and the iPhone offered by Apple Inc. This resulted in a loss of stock value, with the price beginning at $669 in 2000 and falling to $11 by 2009. In 2010, HP Inc. announced its acquisition of Palm, which included an offer that amounted to approximately $5.70 per common share of Palm stock.

RELATED TERMS
  1. Event Risk

    An event risk is the possibility that an unforeseen event will ...
  2. Structural Change

    A structural change is an economic condition that occurs to dramatically ...
  3. Price Change

    A price change indicates a new valuation has been made on the ...
  4. Change

    For an options or futures contract, change is the difference ...
  5. Basis Point (BPS)

    Basis point (BPS) refers to a common unit of measure for interest ...
  6. Event Study

    An event study is an empirical analysis done on a security that ...
Related Articles
  1. Investing

    Fed Jitters: What's Driving the Treasuries Selloff

    Many bond investors are selling 30-year Treasuries, pushing the $13.9 trillion market to a turning point
  2. Trading

    The Upward Potential for Hartford Financial Stock

    Shares of Hartford Financial Services Group are at an inflection point.
  3. Investing

    The Growth In Palm Oil

    With increasing populations, new solutions for how to feed and meet the energy requirements will have to found.
  4. Investing

    Why Intel Is Ready for a 30% Breakout

    Intel shares are nearing a critical inflection point, one that could send shares soaring by 30%.
  5. Investing

    Don't Discount the Dollar as an Investment

    The dollar remains king, and is currently at a critical inflection point. Here's why.
  6. Investing

    Under Amour ‘Fresh Pick’ to Rally 30%: Baird

    Bulls see potential for a 'major inflection in sentiment' during 2018.
  7. Insights

    Goldman Sachs Says Bank of America at an "Inflection Point"

    Goldman analysts optimistic that BofA, which has languished since the 2007-'08 financial crisis, is on the path to recovery.
  8. Investing

    Charles Schwab: Main Street Feeling Better Than Wall Street

    Charles Schwab says that the market is adept at finding infliction points that may leave investors confused.
  9. Trading

    AMD Could Rebound from Strong Support

    AMD experienced a significant decline after issuing weak second quarter guidance, but the stock trades at strong support levels that could lead to a rebound.
  10. Investing

    Financial Stocks a Short, Financial Expert Warns

    Financial stocks have seen a huge bull run in recent months. Fund manager Doug Kass warns the trend may be over.
RELATED FAQS
  1. What are the differences between a change in accounting principle and a change in ...

    Learn how to differentiate between a change in accounting principle and a change in accounting estimate and how accountants ... Read Answer >>
  2. What is the difference between pips, points, and ticks?

    Learn the differences between points, ticks and pips and how each are used by investors to measure price changes in stocks, ... Read Answer >>
  3. Who are Apple's main competitors in tech?

    Explore Apple's competitive position in the many industries in which it operates. Learn about the different products and ... Read Answer >>
  4. How can I calculate funds from operation in Excel?

    Understand how the terms ''work in progress'' and ''work in process'' are used interchangeably to refer to items in the middle ... Read Answer >>
Hot Definitions
  1. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  2. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  3. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
  6. Depreciation

    Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account ...
Trading Center