A Case For Eyeing Apple and Google Results, and Tuning Out the Market Commentary

Google (GOOG) and Apple (AAPL), rivals that also happen to be the most important bellwethers of the technology industry if not the entire U.S. economy, both checked in with quarterly earnings reports this week. One company earned $2.9 billion on sales of $14.4 billion. The other pocketed $13.1 billion on record sales of $54.5 billion.

Keep in mind we're talking about a combined $16 billion in profits over the span of 90 days, or roughly $180 million a day. Profit.

The latter's performance, Apple, was widely viewed as a "disappointment," and the stock has been predictably hammered, spawning columns with titles along the lines of "What's Wrong With Apple?" or "Here Are Three Ways to Fix Apple," etc. Again, that's the company that just set an all-time record for quarterly sales -- and it's had some pretty decent quarters over the years.

Meanwhile, Google, which only earned $2.9 billion on total sales that were roughly $40 billion less than Apple, enjoyed a strong jump in its shares and garnered kind comments from most analysts even though it's struggling, in relative terms, with monetizing ads for the mobile-mesmerized masses and integrating and restructuring the Motorola Mobility unit it acquired eight months ago for $12.4 billion.

Apple, the "laggard," got tagged with a handful of downgrades and revisions that have shaved off 18% of its price-target average in the past six months. All Apple did in its latest quarter was sell 47.8 million iPhones (up from 37 million in the year-ago quarter) and another 22.9 million iPads (up from 15.4 million in the same period last year). Not good enough, according to most analysts' projections. Should have sold at least 50 million iPhones, most said.

Oh, and Apple also declared another dividend ($2.65 a share).

Here's a stock chart showing how these two stocks have fared in the past year:

AAPL Chart

AAPL data by YCharts

It's not too surprising that analysts and shareholders would sell off shares in the wake of Apple's allegedly disappointing quarter, particularly a stock that's been so prolific for so long and a company that does face increasing competition (primarily from Google itself). This is standard operating procedure on Wall Street. Ditto the surge for Google due to it "exceeding" most analysts' estimates even though its total ad sales only grew 19% from the year-ago quarter and the average price for ads displayed next to its search results has declined for five quarters in a row.

But which stock is actually the better value play today? If you're a believer in PE ratio, the answer is fairly clear:

AAPL PE Ratio TTM Chart

AAPL PE Ratio TTM data by YCharts

Finally, let's talk about cash.

Apple has a ton of it -- more than $137 billion at quarter's end. Google's not too shabby either, exiting its fourth quarter with $48.1 billion in cash and equivalents. That's not a projection. It's real.

The difference is the way in which investors and analysts view what that cash really means. In the past five years, Google's clearly been more inclined to put its cash to work to expand its empire and develop new revenue streams -- a strategy that on the surface would seem to appeal more to investors even if there's some inherent risk. Or if the "strategic investment" has less to do with creating new ways to hustle up more sales and profits than protecting the company from protracted patent litigation.

If you're an Apple investor, dividends are a very good thing, with the declining stock price pushing the dividend yield up to 2.4%. So are potential stock buybacks. Both of those are extremely easy -- some might say boring -- ways to appease investors as you squeeze every last nickel out of every last iPad and iPhone you sell while ramping up for the next "sexy" product release to your ridiculously loyal customers.

Either way, this latest quarterly box score, especially when juxtaposed against the past year or five years (chart below), makes it real easy for both sides to cheer. And it's even better news if you're rooting for them both.

AAPL Chart

AAPL data by YCharts

Larry Barrett, a contributing editor at YCharts, has served as a senior writer and editor for websites and print publications including Financial Planning, InternetNews, Multichannel News, CNet and Baseline Magazine. He can be reached at editor@ycharts.com.

Read more articles about: Company Analysis  

blog comments powered by Disqus
Advertisement

Search Articles

Subscribe to YCharts Analysis

Advertisement

{{root.upsell.info.feature_headline}}.
Upgrade to {{root.upsell.info.tier_name}}. Start Your YCharts Membership. Start your {{root.upsell.info.tier_name}} Membership

{{root.upsell.info.feature_description}}

{{root.upsell.info.is_upgrade ? "Upgrade Now" : "Get Started Now"}}

Already a YCharts Member? Already a {{root.upsell.info.tier_name}} Member? Sign in here.