He is talking about the effect on stock price. The second scenario results in lower margins. Stock market analysts look unfavorably on this.

Any investor with half a brain is not solely looking at one specific margin to analyze an investment. That is why you compare profit margin and operating margin and revenue and other measures to build a more accurate picture.

Depending on what you’re optimizing for could be revenue (high growth) or Net income per share (lower growth).

Reality is once you’ve established a baseline it’s difficult to move from one to the other or have substantial changes to the negative for either.