Understanding the valuation discrepancy between Apple and Alphabet Inc.

“For all intents and purpose, Apple (AAPL) and Alphabet (GOOG, GOOGL) are tied in the superficial race to see who has the largest market cap,” Evan Niu writes for The Motley Fool. “Alphabet surged to take the token title of ‘world’s most valuable public company’ earlier this week in the wake of a strong fourth-quarter earnings release, only to give it back to the Mac maker just a couple of days later.”

“Their valuations are still drastically different,” Niu writes. “Why is that?”

“Apple’s top and bottom lines are meaningfully higher than Alphabet’s, and revenue actually grew more over the past 12 months,” Niu writes. “But Alphabet earns over three times the valuation multiples shown.”

Apple vs. Google metrics

“Generally speaking, valuation metrics are a function of future growth prospects more than anything else. Investors clearly think that… Alphabet is worth a lot more in terms of its future growth potential,” Niu writes. “The market perceives Alphabet as having a plethora of untapped opportunities. This perception is indeed justified considering the company’s penchant for experimentation, but at the same time, the market does not perceive that Apple is capable of the same thing… Here’s the thing: Apple is working on a lot of the same things. They just won’t tell you about any of it.”

Read more in the full article here.

MacDailyNews Take: Apple’s secrecy doesn’t play nearly as well on Wall Street than Google’s pie-in-the-sky proclamations that have low to no chances of ever amounting to anything.

SEE ALSO:
On the biased nature of the media: Apple vs. Alphabet in the ‘most valuable company’ race – February 4, 2016
Apple again the world’s most valuable company – February 3, 2016
Alphabet Inc. surpasses Apple, now the world’s most valuable company – February 1, 2016

23 Comments

  1. And where are all the big Wall Street analysts? Can’t they figure this simple stuff out all by themselves? It is so simple a six-year old could do it.

  2. like a beautiful, toned, Man/Woman covered up vs an ugly out of shape Naked person.

    it seems like people (big investors) are so rushed and steamed in the brain they just run after the Naked…

    in spite of the fact that things (revenue numbers, bench of talent etc) show there’s something wonderful underneath those covers of the first …

    ———
    seriously big investors ignore Goog giant failures like Goog Glass (something which Wired etc had cover stories on and was supposed to get as big as iPhone if you listened to the hype ) while they dismiss new Apple initiatives like Watch (which although had hiccup launch) still has WAY BETTER sales than Glass…
    so besides android what has Goog achieved in the last few years? and Note Google makes LESS money on Android than it does with search on iOS

  3. AAPL is simply plagued by this notion that the company “can’t possibly do better” than what it has just achieved. So Apple proves the doubters wrong over and over again but the analysts and investors continue to have the same silly notion over and over again.

  4. Although the numbers are there plain and simple for anyone to see, it doesn’t change the fact that investors are piling into Google and pretty much ignoring Apple. It might have something to do with Apple’s Tim Cook-based valuation.

    These articles make me feel somewhat disoriented on what gives a company value. My personal view of the future is rather cloudy and I don’t understand why these people are able to clearly see things I can’t. I can’t even tell what’s going to happen a day into the future but these people can see months and years ahead.

    If I had a fresh college degree in engineering, I still couldn’t walk into the bank and get a loan based upon my possible future earnings. A bank wouldn’t take that risk and would be foolish to do so. It’s amazing how these big investors are so happy to pour money into Google betting on some vague future prospects. What’s so great about some self-driving car when the streets are filled with human-driven cars? It would be more sensible to have autonomous trains running on their own tracks.

    Wall Street works on this principle of two birds in a bush are worth more than a bird in hand. It goes against all the things I was taught growing up so it’s very difficult for me to grasp the concept. Anyway, whether I understand it or not, Alphabet ends up being Wall Street’s darling and Apple becomes the also-ran.

    One thing for certain, no article is going to change Apple’s pathetic valuation. Apple’s institutional ownership percentage never goes up. The big investors will never be convinced Apple has any growth prospects and that’s all there is to it. I’ve looked closely at Microsoft and I really don’t see why it suddenly has a P/E nearly 4X Apple’s when it was about the same as Apple a year ago. I must really be stupid or short-sighted and that bothers me.

    It’s unfortunate Apple had to be the only wealthy tech company that doesn’t have interest in building a cloud business and I think that’s putting Apple at a huge disadvantage.

    1. Walstreet darling is not goog.. Its amazon, pe 1000

      Apple does have a cloud buisness to the tune of 25 billion a year and growing at 26%… according to Tim.

      Many things can be blamed on wallstreet…
      But the real blame goes to Apples and their Comatose PR department .

  5. They are only looking at the Gross Margins Alphabet is stealing from those who want to advertise using their advertising service. The thing is, most folks do no longer have discretionary income to just “buy stuff”. The smart ones turn off the online advertising intrusions.

  6. There is no logic to this stuff. Stockmarket is just another place to gamble like Vegas, or Trumoville, NJ. Save yourself the trouble. What name sounds good to you? Place your bet.

  7. I’m sure the author was desperately trying to be “fair and balanced” but I was turned off by his opening paragraph wherein he stated, “For all intents and purpose, Apple and Alphabet are tied in the superficial race to see who has the largest market cap.”‘

    Total nonsense! For one thing Apple today has a market cap $53 BILLION higher than Alphabet. For another, Apple has held the market cap crown for 4 years now; Alphabet had it for 12 hours.

    “Tied?” Ridiculous…

    1. @deasystems, One, the author called it a “superficial race”, i.e. meaningless. You don’t get a prize. Two, a more fair comparison would be of Enterprise Value, since market caps are distorted by cash on the balance sheet. By that measure, backing out the net cash, you’d find that Google’s enterprise value is greater than Apple’s. Nuts, but no one said the market was logical.

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