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.

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


  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.

  8. Relax and be patient, Wall Street will be dragged by the scruff of its neck to “love” AAPL again in coming quarters (new products, growth of services, stable margin and buyback which will continue to relentlessly push up the EPS!!).

  9. Now look at the P/E ratio of Amazon: 432.42! This is insane. I love Amazon but at this P/E ratio I would never invest in. Someday there’s got a be a fall. AAPL on the other hand: Some day the P/E ratio needs to come back to 17 or even 20. Personally, I find 20 a fair P/E ratio for investments.

    1. For the most part, PE ratios are a quick way to check a company’s valuation, but it’s an imprecise measure. For a company like Amazon, which deliberately re-invests its earnings, then its PE ratio will look totally out of whack. Normally, the market wouldn’t let a company do that, and would punish its share price, but Amazon investors are different. They’ve listened to Bezos’ explanations and are buying into it, for better or worse.

      If you really want to get an idea of Amazon’s potential profitability, you should use a “free-cash flow” valuation. Even by that measure Amazon is pricey but at least it’s not astronomic.

  10. So Alphabet’s fantasies, despite the failure of the only one even close to real world use, give more hope to investors than Apple’s proven reality in terms of new tech development. Funny old World where delusion is in control of our destiny, no wonder great civilisations collapse from within leaving the expert analysts to ask ‘How did that happen’.

  11. Stock Market 101: Wall Street doesn’t control, decide or “set” the price of a stock. Nor does it “reflect” the state of the economy, let alone the state of any company represented.
    For example, the success of Apple (or lack thereof) has no direct effect on the price of Apple’s stock. Rather, when traders are (in general) more interested in selling it than buying it, the price of a stock declines. The opposite is also true.
    If you “Play” the stock market (trade) you quickly discover the only way to make money on a rising stock is to be among the first to buy it (when it is still low). And the only way to avoid losing money on a declining stock is to be among the first to sell it (when it is still high). The net result, folks, is traders don’t watch the company behind the stock. They are watching each other. If a few start selling a stock, the rest rush to sell it, too. If they hear some news (or some analyst’s comments) that they think will cause other traders to react, they will try to be among the first to so react. Thus they become a self-fulfilling prophecy.
    Investors, on the other hand, are interested in the company. They buy and hold for the long term. For them, it’s a savings account with (hopefully) a better return. But because of this, Investors don’t influence price changes in any way.
    Wall Street is not smart, stupid or clueless. People who cry, “They just don’t understand Apple,” don’t understand the market. It’s a mob-mentality, pure & simple. They don’t care about you, me or Apple. They only care about each other and any “skill” they may have is simply the ability to predict what other traders might do before they do it.

    In other words, “traders” are like sheep… If a few suddenly start to run, they all run and in the same direction. Only afterward will analysts attempt to figure out why.
    What’s the solution for Apple? Minimize their reliance/exposure to traders. So, you begin share buy-backs and bond issues – with an eye toward reducing your risk (from traders) or perhaps one day eliminating it! (Get out of the stock market and go private. All they’d really need is lots of money to fund themselves! Hmmm.)
    I’ll get off my soap-box, now.

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