Taking a look back at thirty days of news across the world, Alphabet might win the market cap battle against Apple, but will it win the war? Maybe not. The median share price forecast of 30 analysts who raised price targets after Alphabet reported strong results on Monday was $920 a share(Report from USA TODAY Feb. 8)
Apple and Google parent Alphabet are battling with each other to be the world’s most valuable company. Investors just want to know which one will be the most valuable in their portfolios.
This week Alphabet saw its market capitalization hit $528 billion to briefly become the 12th company to be the most valuable company in the Standard & Poor’s 500 — passing up Apple, which held the perch since 2012. Apple has since raced back to be No. 1 again, trading for $532 billion to Alphabet’s $502 billion, but the rivalry makes investors wonder which investment will be better over the long term.
Alphabet is Online advertising company. Investors clearly have a favorite for now: Alphbet The company’s ability to mine users’ online personal data and sell them to the highest bidders has allowed the company to dominate the Internet ad business with very little competition yet. Shares of Alphabet are up more than 40% over the past year, while Apple’s shares are down 19%.
We need to consider the following differentials when making a decision, including:
• Brand value of Apple & Alphabet. It is clear that both having good value with respect to their brand such as iPhone, Android. It is looking same for Apple and Alphabet. It will be good in any case.
• Apple’s business is massive compared with Alphabet’s. Apple and Alphabet might be worth about the same in the eyes of investors, but Apple’s revenue and earnings are much larger. Apple’s revenue of $235 billion and net income of $53.7 billion the past 12 months is more than three times greater than Alphabet’s.
• Apple’s growth is seen fading, while Alphabet’s is seen growing. Perhaps because it’s so much larger than Alphabet, and relies on the maturing smartphone business, analysts don’t see much growth from Apple this year. Analysts are calling for Apple’s adjusted earnings and revenue to fall more than 2% this calendar year, says S&P Capital IQ. Meanwhile, analysts see 17.2% and 14% adjusted earnings and revenue growth, respectively, from Alphabet this year. Longer-term, analysts think Apple will regain its growth — calling for 13.2% annual growth — but that’s still below the 16.5% annual long-term growth expected at Alphabet.
• Apple has a lower P-E than Alphabet, but it’s not necessarily cheaper. Apple is trading for 9.4 times its trailing earnings over the past 12 months, making some think it’s a bargain next to Alphabet at 31.5 times earnings. But keep in mind Apple is a big hardware company, which tends to get a lower multiple than Internet companies. Also, Apple is trading for 4.5 times its tangible book value, or what’s left of hard assets minus liabilities, which is roughly in line with Alphabet’s 5.1.
Analysts still think Apple is the better bet, seeing the stock worth $134.76 a share in 18 months for 40% potential upside, says S&P Capital IQ. That beats the 24.8% potential upside to the $912.27 a share 18-month price target for Alphabet.
But investors should know they don’t necessarily have to decide. Both stocks have huge weightings in the S&P 500, so if you own the index you own both. So you win no matter what.
• Points need to take care.
Apple’s main problem is its reliance on the iPhone, which now accounts for two-thirds of revenue. It’s a massive business, but sales in the fiscal first quarter increased only 1 percent from a year earlier, while iPad and Mac revenue dropped. Investors are concerned that unless Apple changes course and decides to compete with lower cost Android manufacturers on price, the iPhone’s best days are in the past.
Meanwhile, Google is convincing investors that in the transition from Web to mobile it will maintain its dominance. According to eMarketer, Google is poised to capture 32 percent of the mobile ad market this year and next, staying well ahead of Facebook, which is around 20 percent. The company generates so much profit from its digital ad business that it can invest in all sorts of potential growth areas, namely autonomous driving and extending life.