They meet.
Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) rubbed noses earlier this month, when Apple finally passed Google in terms of market capitalization. The race is painfully close these days: Apple is now a $153 billion company, and Google is a $152 billion company. So here's a question that could heat up your next investing discussion:
Would you rather own Apple or Google?
This is more than just a matter of personal taste. It's not as easy as Ginger vs. Mary Ann, Coke vs. Pepsi, or even Kirk vs. Picard. The choice is tough, because both companies rock on substance.
Both stocks have been stellar for shareholders in recent years. Google has been a five-bagger since going public in the summer of 2004. Apple has roughly doubled that heady return in that time.
They're both hot stocks. They're both cool companies. Let's check in with both camps to see which one works for you.
A is for Apple
Remember when Apple was a niche player for rich, artsy nerds? A lot has changed. Steve Jobs' class act in computing is on pace to move 10 million Macs, 10 million iPhones, and a ton of iPods this year.
Let's talk iPhone, where the company has birthed a cottage industry for digitally delivered software applications. Even with its nascent user base, Apple's App Store rang up $30 million in sales in its first month alone this summer. Palm (Nasdaq: PALM) has the pedigree -- and Research In Motion (Nasdaq: RIMM) has the lead -- but how can you not embrace the ecosystem that Apple has nurtured around its smartphone?
Apple does this everywhere it goes. It is now the leading music retailer, on the strength of its iPod. More Macs mean more people working on Mac's operating system platform and buying proprietary software.
It all adds up to an amazing money-making machine; Apple has beaten Wall Street estimates in each of the past 21 quarters. Its latest is another gem, with revenue soaring by 38% and earnings improving by 29% on a per-share basis. There are concerns of contracting margins, but Apple knows what it's doing. If slimmer markups are the key to global domination, will a Seinfeld-focused Microsoft (Nasdaq: MSFT) really get in the way?
G is for Google
Ninety-nine percent of Google's revenue comes from online advertising, but that's one heck of a basket to have most of your eggs in. As the undisputed leader -- with 60% of the stateside search-engine market, and gaining -- Google is milking fat margins as it appeals to hungry advertisers craving the full accountability of interactive marketing campaigns.
Google's dominance is so powerful that it threatened to send its nearest competitors -- Microsoft and Yahoo! (Nasdaq: YHOO) -- into what would have been a loveless marriage, and they would still have only commanded less than half of Google's share of the market.
Google is big, but it's still a speedster, nearly matching Apple's latest quarter by growing its revenue by 39% and profits by 34%. However, Google isn't keeping up with Apple's market-thumping streak. It has actually missed Wall Street estimates in a few of its recent quarters.
The moral of the story is that the Internet is here to stay. Even though regional player Baidu.com (Nasdaq: BIDU) is growing even more quickly, Google is the global poster child.
Tough choice
You want to own both. Thankfully, you can. However, if you had to keep only one, which would it be?
Apple has more momentum, but it's also the more expensive choice. Apple is trading at 33 times this year's projected earnings and a still-heady 29 times next year's forecast. Google appears to be a relative bargain, at 25 and 20 times bottom-line estimates for 2008 and 2009, respectively.
They both have killer brands and killer moats. So what's it going to be? Let me know your choice in the comment box below, and I'll be back next week to go over both sides of the story.
It's the $150 billion question, give or take a few billion.
Other ways to split the difference:
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