Apple has two members of the FAANG exclusive club (AAPL) and the Alphabet (GOOG). Both companies have market capitalization of more than $ 806 billion and $ 763 billion respectively and some of the largest companies in Wall Street are. YTD, the stock prices of both companies have received by 8% and 6% respectively. A period back, after this article was published on Apple, a message reader asked me to compare the company between Apple and Alphabet better investment. In this article, I will compare the two companies and complete the one I would like to recommend as a long-term investment.
As regards this part, I will compare how the two money goes. Over the past twelve months Apple has earned more than $ 261 billion. Most of this income comes from the iPhone, accounting for more than 62% of the total sales. With the start-up of the iPhone income lower, the company rely on the generating services sector of more than $ 10.2 billion in the fourth quarter. His other income comes from computer products such as iPad and Mac. Geographically, the United States is the largest source of income and subsequent Europe and China.
Apple's investors are delighted because of the high edge it generates from sales. In the final earnings, the company had 38% of huge filling but EBITDA and net profit margins were 33% and 23% respectively. These margins are higher than other hardware companies. However, as the company changes to the segment of services, these margins could slowly start.
In the same period, the Alphabet generated revenue in excess of $ 145 billion. Most of these revenues came from the Google segment, including all advertising products. As companies transfer their media advertising budgets to digital, a alphabet has emerged as a winner because of the role of search, YouTube and Android in the market. 54% of the alphabet's edge, and EBITDA and net profit margins are 32% and 22% respectively. The reason why the profit margin is reasonably lower is that GOOG is increasing its spending to try to shorten growth. I believe that the edge of the alphabet will rise in the long run when the current investments begin to mature.
Apple has a large balance sheet with more than $ 373 billion in total assets. Of these, the current assets are $ 140 billion. Money and short-term investments are more than $ 86 billion. In the liability side, the company has total liabilities of more than $ 258 billion. From this, short-term and long-term debt consists of more than $ 110 billion. Shareholder equity exceeds $ 117 billion. The strong balance sheet enabled Apple to return money to investors by sharing purchases and dividends. For the last five years, the company issued dividends worth almost $ 70 billion and they bought back stock more than $ 280 billion.
The alphabet has a total assets of more than $ 273 billion on the other hand. Money and short-term investments are more than $ 109 billion and current assets with more than $ 135 billion. Its total liabilities are $ 55 billion. He has no short-term debt but over $ 3.9 billion is in long-term debt. Shareholders' equity is more than $ 177 billion. Even with this balance sheet, Apple will not issue dividends but spent more than $ 30 billion in some re-sale over the last five years. The company is likely to return to repayment of investors' money through dividends in the coming years.
With Apple's main feature diminishing, the company is banking on the services segment. This includes products such as Apple Pay, Apple Music, Apple Appstore, and Appleplayplay. Already, this division has generated an excellent growth for the company with a quarterly income of more than $ 10 billion.
It is also intended to launch streaming video service to compete with Netflix (NFLX). While the industry has a high level of competition, Apple could become a major player in the industry due to its large base installed. He also started creating partnerships with other TV companies like Samsung and LG. However, this is not an easy industry for the company because other companies such as Netflix, Disney (DIS) and Amazon, which have a large library of original programs
will continue on the future. The number of Alphabet of the advantages of Apple. Initially, Apple has already been established in China, where it receives revenue over $ 50 billion. The problem is that Apple's mobile phone competitors from China like Huawei and OnePlus are getting a market share, resulting in a slow decline in Apple growth. On the other hand the alphabet has more room to grow in China through its android product. The monopoly will remain near Android in China because Android is free to use by the manufacturers. As the economy grows, the alphabet could generate more revenue from the app store in China. The company is also thinking of a re-launch of the search product in China.
Second, the Alphabet has invested billions of dollars of the Waymo product. In alphabetical reporting, Waymo shares the Other Bets segment, which makes a small amount of the total revenue of the Alphabets. This may change when Waymo starts to generate revenue. Indeed, analysts value Value yourself at more than $ 100 billion. In a recent note, UBS analysts say Waymo generated more than $ 114 billion in 2030.
Third, the alphabet will continue as market leader in online marketing. It is expected that this industry will have a 21% CAGR up to 2026. Of the best companies in this space – Amazon, Twitter (TWTR), and Snap (SNAP) – GOOG is the best location. This is because GOOG owns and has no significant competitor. It is owned by Android, where it has no major competitor and is also owned by YouTube, another platform that has no meaningful competition. With this ecosystem, GOOG will continue as the largest ads in the world.
Fourth, GOOG has invested on the Google Ventures platform. Uber (UBER), Slack, and Stripe are among others who have invested. It also invested in existing public companies such as DocuSign (DOCU) and Hubspot (HUBS). Other companies acquired are Flatiron Jet, Cooperation and Medicine. When Uber and Slack were getting into the community this year, the company could see a huge view of investments. Apple has no venture capital on the other hand, unlike other technology companies such as Microsoft, Salesforce (CRM) and IBM (IBM). Instead Apple focuses on private investments such as Didi and Finiser. He also invested some of the funds for the Vision Fund. Therefore, from the point of view of the enterprises, I believe that the Alphabet is better placed for growth than Apple.
In addition, GOOG is a more diversified company that is not Apple's. In this way, the company spent years building products for both consumer and entrepreneurial customers. As regards the venture, GOOG's relatively new products are like the cloud starting to build fruit. According to Citi (C), GOOG, the fifth largest cloud company in the world, could see their cloud revenue exceeds $ 17 billion in 2020. GOOG has increased by focusing on consumer products as well, and its Google Pixel devices are getting good reviews. Additionally, other devices like Google Home Hub are getting good reviews. He has also joined AI, cognitive science, and medical research. Although these products will continue as a small part of the total GOOG income, I look at the diversification of the company as a major. On the other hand, Apple had a successful consumer company. This is not a bad thing because Apple has a good deal on consumer products. However, I believe that GOOG diversification over all its products offers margins across GOOG.
The two companies face challenges. The challenge of tackling Apple's sales on Apple and this week, it has been shown that some of the apps are recording user screens without their permission. This is a risk for Apple, a company that has long been involved in the pursuit of privacy. Apple's challenge is to be in line with a high-edge hardware product similar to the iPhone. His recent efforts have not been successful in entering the smart speaker industry.
The regulations are challenged by the alphabet on the other hand. In recent years, the company has received large European Union fines and more similar fines are expected. The company is the largest accidents on the rules proposed in Article 13 by the union. It is also being scrutinized by the lawsuit from a number of countries regarding fake news dissemination through its platforms. Companies like Netflix and Epic Games are challenged – Fortnite owners – moving away from the respective app stores.
Declaration: The Alphabet won
To be clear, GOOG and Apple have big companies that have changed the world for better. Both companies also have a number of challenges in relation to privacy and regulation issues. However, as an investment, I believe that GOOG itself is a better company than Apple. Initially, the company has more than $ 109 billion in cash and debt very little. This means that GOOG is likely to start the return of investors in the form of dividends within a few years. Second, GOOG continues to share the largest market share in online ads and there is no adjudicator. This is not like Apple, and a major threat to other phone manufacturers such as Huawei, Samsung, and OnePlus whose main product is. Third, as mentioned above, GOOG has a more diversified company than Apple generates both client and entrepreneurial income. Fourth, GOOG invested billions in research areas aimed at cognitive solutions, healthcare and biosciences, and life sciences in other areas. These investments could help GOOG the biggest player in these industries.
Exposure: I am / we are long GOOG, AAPL. I wrote this article itself, and it reflects my own opinions. I do not get compensation (other than Alpha Find). I have no business relationship with any company whose stock is mentioned in this section.