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At a crossroads, Apple must make one huge decision

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Apple shares are suffering their second-worst day of 2013 on Wednesday, after the company unveiled new iPhones on Tuesday that didn't exactly wow investors. Notably, by unveiling a "less expensive" iPhone (the 5C) that still costs $549 without a contract, Apple did not go for the low end—or even the middle end—of the market, as some had hoped it would.

By maintaining the same prices, Apple is maintaining the same fundamental tension in its business: the tension between margin and market share. Some had hoped that Apple would sacrifice a bit of the former for the sake of the latter, but that hasn't happened yet.

"At some point in this game, Apple has to make a strategic decision," said Max Wolff, chief economist and strategist at ZT Wealth. "Eventually, they have to choose market share or margin. And $550 [for the iPhone 5C] is not how you maximize your market share."

(Read more: Nokia's tweet taunt of Apple goes viral)

Of course, high prices are a big part of Apple's business model, and not for the sole reason that engenders large margins for the company. "To preserve their premium brand and premium image, they have to charge a premium," Wolff said. After all, when people buy an iPhone, part of what they're buying is "the lifestyle."

Still, with Apple ceding more and more market share to the Android operating system, "the missed opportunity might have been a more aggressively priced 5C," Wolff said.

(Read more: Apple TV set for refresh, along with iOS7: Report)

Credit Suisse analyst Kulbinder Garcha believes that Apple already has chosen a path—and chosen the wrong one. In a note entitled "So much for the low end …," Garcha downgraded Apple shares to "neutral" from "outperform" (he maintained his $525 price target).

"We remain disappointed with Apple's decision to remain a premium priced smartphone vendor, and this continued to competitively expose the company," Garcha wrote.

It's not just that Apple is ignoring the lower ends of the market. Garcha calls the $400 smartphone segment "low growth," and notes that even at the high end, "Apple faces strong competition from Samsung, which holds the other 50 percent of category market share."

All in all, Garcha paints a bleak picture of where Apple's market share is headed. "On our new estimates, Apple's smartphone share will decline to 15.5 percent/13.1 percent this year and next from 18.1 percent last year," Garcha wrote.

(Read more: Hey Apple, where's that Steve Jobs-inspired iTV?)

The choice for Apple appears to be clear: Make an attempt to appeal to lower-end customers in the U.S. and abroad, or own a smaller and smaller share of the same high-end market.

For now, Apple is choosing the latter. And in return, analysts and investors are choosing to dump the stock.

—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.

Follow the show on Twitter: @CNBCOptions.

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