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It's interesting when you have a conversation about
(AAPL - Get Report)
, whether on the retail or institutional level because even pros make the
mistake of falling in love with the product and insane obsession of the brand. In other words, there can be way too much drinking of the Kool-Aid and not enough unbiased analysis. Without question, AAPL has delivered some of the most iconic minds and brands that our generation has seen. Just look at the footage in every major city every time AAPL launches a new product or how the Twittersphere and blog world lights up on new product or software speculation.
Then you have a name such as
(GOOG - Get Report)
, which is truly a unique story in itself. The term "eponym" refers to person or thing, whether real or fictitious, after which a particular place, tribe, era, discovery, or other item is named or thought to be named. When you go to search something online, it is very common to hear someone say "I am going to Google that." It's similar to when people reach for a tissue, they say they are going for "Kleenex," or while making a photocopy, they are going to "Xerox it." That is a pretty tremendous accomplishment when a brand can integrate itself on that scale into popular culture. Now, just like AAPL, separating brand loyalty from fundamental and technical analysis is key to making the most educated stock selection possible.
So let's examine some key metrics for both names and see why I would look to GOOG for a longer-term holding more so than I would AAPL. The good thing with leaders like AAPL and GOOG, there is plenty of momentum and volume for the shorter-term trader to find opportunity as well but let's focus on fundamentals and a thesis that lends to a core holding.
First, just to be 100% clear, I have an iPhone and an iPad and Google is essentially my bible for everything. That said, I do not own either name, as my role at TheStreet and my affiliation with an execution broker restricts me from trading; this helps me to construct an unbiased view. Second, just because I like GOOG more than I do AAPL, this does not mean that I would short the latter either. I simply think that allocating capital to GOOG is a better choice for a longer-term investment.
Let's review some AAPL metrics and then get into the case for GOOG. Again, this is not the stage to bash AAPL or recommend going short. For sure, the iPhone upgrade was solid (except for maps) and shares have some potential for upside into the holiday season. For the next two quarters alone, consensus expects 50 million-60 million iPhones to be sold. But then you also have
reporting great numbers on its Galaxy 3 smartphone. My biggest concern with AAPL is its product dependency and margin compression/expansion and cannibalization of the product. Those of you who traded Motorola
in the early 2000s know all about that and the RAZR flip phone and Startec.
Google is the world's leading search engine and the company just celebrated its 14th birthday. After hitting its old all-time high of $747 a share nearly five years ago and topping out, the shares fell as low as $260 in the midst of the credit crisis. Since then, the shares have slowly climbed their way back to new all-time highs, and I believe there is more upside. Analysts have been raising their price targets on GOOG to $850 from $740. The company is expected to increase its ad spending to around 20% in the third quarter, and new efforts to monetize Google Maps will help boost revenue. YouTube is growing, Android is dominating, search isn't going anywhere (the amount of resources and skill required to really succeed in Search are very significant, as
(YHOO - Get Report)
and Bing's limited results to date demonstrate), display is growing, and
(FB - Get Report)
did not turn out to be the threat people thought it might be.
The key with GOOG is mobile monetization and the success the company has had with it. Facebook miserably at it and we all know what that has done to the stock price and market cap in that name. Not only has GOOG proved its superiority with mobile monetization, it showed improved cost per click metrics last quarter, beating consensus expectations that could also continue and provide further momentum to the stock price.
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