This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Great Google-Apple Divergence

NEW YORK ( TheStreet) -- Back in 2011, when I first started writing about financial topics, I remember pounding the table for Google (GOOG - Get Report) over Apple (AAPL - Get Report).

I was still pounding the table last September. At Seeking Alpha, I wrote "A Strong Cloud Beats a Strong Device." Since then, investors have been buying that idea big-time.

Maybe too big. Since I wrote that piece, Google shares are up nearly 27%, a roughly $70 billion increase in its market cap. Apple, meanwhile, is down 34%, a loss of almost $200 billion to investors.

So my efforts have turned toward the other side of the trade. I have written lately that Apple is practically giving its stock away and that Google is in a bubble.

This hasn't changed the trend. Investors are still paying 250% more for Google earnings than for those of Apple. They're paying almost $6 for every $1 of Google sales and less than $3 for every $1 of Apple sales.

The reason given for the divergence is growth.

Apple's sales figures for the quarter ending in March, 2013 were only about 10% higher than those for the previous March. Google sales were up nearly 35%, year over year. Both companies offer similar profit margins of 25%, but Google's are on an uptick and Apple's have been trending down.

The argument is that Google is growing faster, that its margins are expanding while Apple's are contracting. That's true, but it still doesn't explain such a huge divergence. Such arguments are usually made to explain what has happened. You make money from what will happen.

What I know is that Apple, which before the divergence seemed to be run in order to please itself, is now trying very hard to please investors and consumers. The company has dumped a great load of cash on shareholders, is buying back stock as fast as it can, and now reportedly plans to launch dirt-cheap iPhones and phablets by the end of the year, USA Today reports.

Google, meanwhile, has been teasing a Glass product that may flop completely in the mass market, it has tied products together to control users, and it has begun running afoul of governments on both sides of the Atlantic.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.18 0.00%
GOOG $692.36 0.00%
FB $117.43 0.00%
TSLA $232.32 0.00%
YHOO $36.01 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs