Ad strength, Apple uncertainty drive Google's stock share surge

Posted:
in AAPL Investors edited January 2014
By most metrics, Apple is surging, with record sales and insatiable consumer demand, but it is Google that has become Wall Street's latest stock darling, even as shares of Apple have declined.



Apple remains among the most valuable companies in the world, trading first and second place with Exxon Mobil as its share price fluctuates. Apple's market cap is still 46.4 percent larger than Google's, but the search giant's surging share price is gradually narrowing the gap. Google's stock has risen by 35 percent in the past 12 months, while Apple's has dropped 21 percent. As of 9:00 a.m. EST on Wednesday, Apple was trading at $431.14, while Google was near twice that at $838.60.

The reason, a Bloomberg article explains has to do with ads and optimism. Google holds more than 40 percent of the U.S. online ad market, with the potential to grab even more going forward.

"There's only one company, benefitting from all the growth areas of the Internet ? be it video, mobile, local, social, display advertising," one analyst said. "Apple has just done well in devices, nothing else."

That analysis may sell short the strength of Apple's device sales model, which generated $12.9 billion in revenues for supporting software in 2012. It does, though, capture investor sentiments regarding the two companies.

In terms of operating systems, the two companies together account for more than nine out of ten smartphone shipments worldwide. The number of areas where the two companies directly compete is growing also. Google, which already owns smartphone and tablet manufacturer Motorola, recently announced a Chrome OS-powered notebook with a high-resolution screen that tops even Apple's Retina MacBook Pros.

With the premium smartphone market appearing to approach saturation, investors are concerned that Apple's model can only take it so far unless the company introduces another breakout product. Current rumors center on a possible iWatch or the perennially-expected Apple TV.

Neither of these products is certain to arrive in the coming year, though, and competitors are drawing consumer interest in the smartphone segment by offering devices with larger screens and comparable build quality. Apple's main competitor ? and Google's largest Android ally ? Samsung is also preparing to launch its 2013 flagship smartphone, with the accompanying marketing campaign aimed at knocking Apple from its perch atop the smartphone market.

Google, meanwhile, will grab 55 percent of the U.S. mobile advertising market this year, according to EMarketer, growing that share to 57 percent in 2014. Its Android operating system is on more than two out of every three smartphones sold worldwide, ensuring that its mobile ad presence will continue to grow. Google also moved ahead of Facebook in display-based advertising in 2012, with 18 percent of the market. Add to that the resolution of multiple anti-trust investigations, and investors see a huge opportunity for continuing growth for the company.

Not all of the investor class is down on Apple, though. Berkshire Hathaway chief Warren Buffett said recently that he believes Apple should buy back its own stock using some of its $137 billion cash pile. Buffett likened the tactic to "buying dollar bills for 80 cents." Also, analysts at Goldman Sachs recently described AAPL as the most undervalued stock the firm covers, targeting its price at $660.
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Comments

  • Reply 1 of 38


    Misleading. Why would Apple uncertainty drive Google up? Apple and Google are not competitors. Apple is a hardware company that makes money selling iDevices and computers. Google is a software company that makes money from search and advertising.

  • Reply 2 of 38
    pedromartinspedromartins Posts: 1,333member

    Quote:

    Originally Posted by EricTheHalfBee View Post


    Misleading. Why would Apple uncertainty drive Google up? Apple and Google are not competitors. Apple is a hardware company that makes money selling iDevices and computers. Google is a software company that makes money from search and advertising.



    For the average joe, they are competitors, and Apple is losing because apple is losing. lol

  • Reply 3 of 38
    ortort Posts: 39member
    "There's only one company, benefitting from all the growth areas of the Internet %u2014 be it video, mobile, local, social, display advertising," one analyst said. "Apple has just done well in devices, nothing else."

    Couldn't you also say that Google has done well in advertising and nothing else?

    Couldn't you also say that Apple makes three times as much selling devices as Google does selling ads?
  • Reply 4 of 38


    Google's profits come 98% from search advertising.


     


    Not phones or anything else.


     


    Imagine if there is a cyclical downturn in search.  In fact, search rates have started to decline in the last two quarters for Google. 


     


    Apple has a lot of horses to ride on – tablets, phones, computers, iTunes.  Google not so much.  I really think Google is a house of cards. 

  • Reply 5 of 38
    This is sad that Wall Street is driving the true hw makers out of this country. Ad model wins. As a hardware engineer, it is said to see this trend....
  • Reply 6 of 38
    apple ][apple ][ Posts: 8,360member


    It's pretty funny. I was debating if I should pick up a few AAPL today, but then I said screw it, I am so damn tired of AAPL and how it's been performing lately. I basically decided to pick up some shares of a totally random stock, that I know virtually nothing about instead, and it's up a few percent so far.image It sure beats buying AAPL and wondering why the hell it's not moving up. The goal here is to make money, not to waste time or to lose money.


     


    There must be too many shares of AAPL out there, since it's only going down and down. Apple needs to take some of those shares off the market, IMO.

  • Reply 7 of 38
    srangersranger Posts: 469member


    First of all, the stock market is one big Ponzi scheme. (Or pyramid if you like)  Many years ago, the price of the stock was somewhat related to the value of the company.  


     


    THAT IS NO LONGER TRUE....


     


    Now it is based almost entirely on the potential growth of the company.  This has to do with the "Next Quarter" mentality that has nearly destroyed many of the once great companies in this nation.  There are many reasons for this, but it kind of boils down to pure greed.  A modern CEO is typically EXPECTED to DO ANYTHING to have a great "next quarter" including destroying the long term health of a company.....


     


    Since Apple really does not play this game and tend to make decisions based on long term growth it kind of goes again what Wall street expects.  As a result, Wall Street is basically punishing Apple for doing the right thing for the long term future of the company....

  • Reply 8 of 38
    rob53rob53 Posts: 1,949member
    This is typical of the insanity happening in the stock market. Nothing makes sense. Throw out your Econ 101 books because nothing happening today makes any sense to anyone other than those manipulating the stock market for their own gain. Apple is making money, nobody can say they aren't. Apple is doing very well making things by any sane person's evaluation. The problem is, we aren't dealing with sane people or people who actually are investing in a company. They are betting against a company to force it to either fail or succeed in the market. These people don't care how much money Apple makes all they care about is how much they make off Apple's back. If I were Apple, I'd be buying as much stock back as possible at these low values. Get rid of those stupid hedge fund idiots and find a way to get Apple off the exchange. This ends up hurting all the real investors, especially the same ones who are long-term investors. This won't happen, of course.
  • Reply 9 of 38
    zarmanzarman Posts: 1member


    Google is an Ad company. They make software and give it away to sell more Ads. They also make hardware. Chrome laptop, MOT, and most recent high profile Google Project Glass. Hardware is just another extension of Apple's ecosystem that encompasses the entire user experience. They do also do software, content publishing, books, music,  services, etc...

  • Reply 10 of 38


    I dislike Google throughly (even more than I dislike Philip Morris).  Their business model is based on invading people's privacy.  They go out of their way to collect as much information about you as possible, so that they can target advertising to you.  Advertisers are willing to pay a lot for this.


     


    But I can see why Wall Street likes Google, and why Google is a big threat to Apple.  Google is now getting into selling hardware at cost because they know they will make money on advertising.  That is why the Nexus phones and tablets, and Chromebooks are cheap.  They just want to get these devices into as many hands as possible.  Once these people start using Google's Android and Chrome OS, they become captive, and Google can collect all kinds of information on them.  Talk about "Big Brother!"


     


    Unfortunately, most people do not realize or don't care that Google is invading their privacy.


     


    Furthermore, once Apple sells a device, Apple makes its profit and nothing more.  But Google keeps getting money from that device as long as it keeps getting used, via search (advertising) and Apps like Google Maps, Youtube, and so on.  As the installed base of mobile and desktop devices keeps growing, Google's revenues will keep growing.  This is the business model Wall Street loves.


     


    Regulators need to get involved to stop Google's methods.  But, Google (Eric Schmidt) is very good at schmoozing the regulators.  


     


    This strategy of Google (with Samsung's help) will put pressure on Apple's gross margins.  That is why Apple's stock is under pressure.


     


    Apple needs to attack Google's search business, and put pressure on Google's margins.  That is how I hope Apple decides to use its cash.

  • Reply 11 of 38
    Google succeeds on Android by being the best.

    So what happens when they lose their software innovation quality?
  • Reply 12 of 38
    rickagrickag Posts: 1,626member
    AppleGreen

    I agree. Maybe Apple is quietly working on a search engine.
  • Reply 13 of 38
    jragostajragosta Posts: 10,473member
    Interestingly, Google already has 40% of total ad revenues as cited in the article. They're trading at 25.5 times earnings.

    AAPL is trading at 9 times earnings. So even if Google's share was 100% of all advertising revenues, they're still overpriced relative to APPL. And that doesn't even consider that Apple is still growing while Google's revenues look like they may have peaked (earnings definitely have).
  • Reply 14 of 38
    matrix07matrix07 Posts: 1,993member

    Quote:

    Originally Posted by AppleGreen View Post


    I dislike Google throughly (even more than I dislike Philip Morris).  Their business model is based on invading people's privacy.  They go out of their way to collect as much information about you as possible, so that they can target advertising to you.  Advertisers are willing to pay a lot for this.


     


    But I can see why Wall Street likes Google, and why Google is a big threat to Apple.  Google is now getting into selling hardware at cost because they know they will make money on advertising.  That is why the Nexus phones and tablets, and Chromebooks are cheap.  They just want to get these devices into as many hands as possible.  Once these people start using Google's Android and Chrome OS, they become captive, and Google can collect all kinds of information on them.  Talk about "Big Brother!"


     


    Unfortunately, most people do not realize or don't care that Google is invading their privacy.


     


    Furthermore, once Apple sells a device, Apple makes its profit and nothing more.  But Google keeps getting money from that device as long as it keeps getting used, via search (advertising) and Apps like Google Maps, Youtube, and so on.  As the installed base of mobile and desktop devices keeps growing, Google's revenues will keep growing.  This is the business model Wall Street loves.


     


    Regulators need to get involved to stop Google's methods.  But, Google (Eric Schmidt) is very good at schmoozing the regulators.  


     


    This strategy of Google (with Samsung's help) will put pressure on Apple's gross margins.  That is why Apple's stock is under pressure.


     


    Apple needs to attack Google's search business, and put pressure on Google's margins.  That is how I hope Apple decides to use its cash.



    Plus, like Gruber said, Google's beginning to do what Apple does best (hardware) faster than Apple doing what Google does best (internet service).

  • Reply 15 of 38
    dasanman69dasanman69 Posts: 12,969member
    sranger wrote: »
    First of all, the stock market is one big Ponzi scheme. (Or pyramid if you like)  Many years ago, the price of the stock was somewhat related to the value of the company.  

    THAT IS NO LONGER TRUE....

    Now it is based almost entirely on the potential growth of the company.  This has to do with the "Next Quarter" mentality that has nearly destroyed many of the once great companies in this nation.  There are many reasons for this, but it kind of boils down to pure greed.  A modern CEO is typically EXPECTED to DO ANYTHING to have a great "next quarter" including destroying the long term health of a company.....

    Since Apple really does not play this game and tend to make decisions based on long term growth it kind of goes again what Wall street expects.  As a result, Wall Street is basically punishing Apple for doing the right thing for the long term future of the company....

    Blame all the amateur day traders trying to make a quick buck.
  • Reply 16 of 38
    aaarrrggghaaarrrgggh Posts: 1,565member
    jragosta wrote: »
    Interestingly, Google already has 40% of total ad revenues as cited in the article. They're trading at 25.5 times earnings.

    AAPL is trading at 9 times earnings. So even if Google's share was 100% of all advertising revenues, they're still overpriced relative to APPL. And that doesn't even consider that Apple is still growing while Google's revenues look like they may have peaked (earnings definitely have).
    Good point, although it doesn't tell us if the mobile advertising market is going to expand or stay flat.

    Google is a good technology proxy for Apple, so if you are going to sell AAPL, GOOG is likely to be purchased with about 70-80% of the money. I'd guess AMZN would get 10%, and maybe CRM would get 5%. The remainder might be taken off the table or find a different sector.

    I think GOOG is grossly overvalued personally, and wouldn't be too sad to unload if my covered calls get executed at $850. They are projecting 14% growth (which has pretty substantial risk), and I really see them plateauing soon. Could be wrong though... sure have been with AAPL the last four months!
  • Reply 17 of 38
    allenbfallenbf Posts: 993member


    Click bait.

  • Reply 18 of 38
    palominepalomine Posts: 361member
    I still say that sooner or later fundamentals will take over the driver's seat for stock prices.
  • Reply 19 of 38
    mikeb85mikeb85 Posts: 506member


    I've said this many times, but keep in mind what the valuations are here....  Apple is still worth nearly twice as much as Google.  


     


    My Lenovo stock is up 20% this year, while Apple is down.  Is Lenovo worth more than Apple?  (for those too lazy to look, the answer is a definite no)

  • Reply 20 of 38
    mikeb85mikeb85 Posts: 506member

    Quote:

    Originally Posted by rob53 View Post



    This is typical of the insanity happening in the stock market. Nothing makes sense. Throw out your Econ 101 books because nothing happening today makes any sense to anyone other than those manipulating the stock market for their own gain. Apple is making money, nobody can say they aren't. Apple is doing very well making things by any sane person's evaluation. The problem is, we aren't dealing with sane people or people who actually are investing in a company. They are betting against a company to force it to either fail or succeed in the market. These people don't care how much money Apple makes all they care about is how much they make off Apple's back. If I were Apple, I'd be buying as much stock back as possible at these low values. Get rid of those stupid hedge fund idiots and find a way to get Apple off the exchange. This ends up hurting all the real investors, especially the same ones who are long-term investors. This won't happen, of course.


     


    It makes perfect sense to those of us who understand the stock market enough to make a living off it.  

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