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.
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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV