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Apple Wins Christmas

Stocks in this article: AAPL GOOG

NEW YORK (TheStreet) -- Ever since the Apple (AAPL) iPhone was launched, in 2007, investors have been able to set their phones' clocks to a Christmas rush for apps.

The big news this Christmas was that the rush slowed down.

Flurry, a mobile measurement company, reports that Christmas app downloads were up only 11% from a year ago. 

It's true that overall app sales were up 25% throughout December compared with 2012, but it adds up to a maturing market, at least in the Western Europe and English-speaking countries Flurry tracks.

Games, social apps, media apps and lifestyle apps were all popular at Christmas, but unlike the pattern of past years, the lifestyle segment trailed social and media, by a considerable margin.

That doesn't mean smartphone sales are going to slow. My own experience shows that batteries remain a big problem. Repeated recharges and discharges have left my Google (GOOG) Nexus phone tied to the wall almost as much as my laptop is.

Solutions are coming. Circuits can cut off recharging after a battery is full, as is done with laptops. New battery designs may prove more durable than those installed last year.

The bottom line is I'll need a new phone this year. You may, too.

The replacement cycle is also hitting the tablet and phablet markets. I spent Christmas Eve playing with a friend's small tablet that had become a "brick," failing to turn on. Our solution was to buy him a new phablet, from a different company.

All this means that buyers are becoming more knowledgeable in their device purchases, more choosy, and that the word investors need to look to for future growth is monetization.

Monetization occurs when a phone or tablet owner decides to buy, not just download, a new app for their product. And when it comes to monetization Distimo, another device analytics company, has a word for you.

That word is Apple.

Distimo's estimates are that Apple's app revenue rose 56% during December from a year earlier, which is even better than the 53% growth in downloads.

These are global numbers. Figures were even more impressive if you look at developed countries. Apple's app revenue was up 97% in the U.S., and 161% in the U.K. Growth in Asia was negligible.

If you're looking for growth in the Google Android side of the house, the word from Distimo is "freemium." These are apps you can download free, but which allow purchases within the app. Seven of the top 10 Google downloads last month were of this type.

What all this tells me is that you should be buying Apple stock with both hands. Its price-to-earnings multiple, based on past earnings, remains around 14, and is less than half that for Google, now standing at 32. The chances for an upside surprise when Apple next reports earnings is high.

Apple seems to be winning the second-generation phone war with Google, and its budget 5C line, which analysts downplayed last year, may be poised to do well in those fast-developing Asian markets such as India, not to mention Africa, which is also seeing phone growth.

Plus, Apple knows how to grab more dollars from existing users than Google does, or any other company not named (AMZN). (The replacement phablet I got my friend Christmas Eve was an Amazon Kindle, which cost less than replacing his battery at a store would have.)

None of this means you should be selling Google shares. The company has more irons in the fire than just phones and tablets. But to me, the latest numbers show that Apple remains the play, and that patience in this case will be rewarded.

At the time of publication, the author owned shares of Apple and Google.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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