Consider it a clash of the titans -- the world's biggest publicly traded company (as measured by market cap) versus the web's most encompassing brand. Apple's (AAPL +0.83%) market cap last weighed in at $1.4 trillion, sporting trailing 12-month revenue of $268 billion. Google's parent company Alphabet (GOOGL +0.87%) (GOOG +0.66%) isn't quite as big or as profitable with a market cap of $1.04 trillion and TTM revenue of $161.9 billion, but the Google logo remains one of the web's most recognized brands, edging out Apple on that front.
Size isn't necessarily everything to investors, of course. Apple is bigger, but its profits are also divvied up among more shareholders. Alphabet may have more opportunities for growth. Each company should be weighed on its own merits and prospects.
To that end, if an investor only had room for one name or the other right now in his or her stock portfolio, which would be the better bet?
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The case for, and against, Apple
It's a name that needs no introduction. Apple makes the world's most popular smartphone and has excelled at extracting revenue from owners of that smartphone.
Its digital services unit, which sells apps and content, grew another 17% last quarter, and while that $12.7 billion worth of services revenue pales in comparison to the $79.1 billion worth of hardware it sold during the same three-month stretch, the hardware segment is still growing too. The services segment's top line improved 7.7% for the quarter ending in December.
Perhaps most encouraging is that sales of the iPhone, contrary to some analysts concerns, haven't hit a ceiling yet. Although the company doesn't disclose the exact figures anymore, IDC estimates the company sold 73.8 million iPhones during the last quarter of last year, growing the tally nearly 8%. The feat is even more impressive given the political tensions between the United States and China over the past 18 months, the latter of which is an increasingly important market for Apple.
The market has rewarded this success, as well as all the company's other 2019 victories leading up to another sensational quarter. As of right now, AAPL shares are higher to the tune of 90% for the past 12 months, with investors unafraid of paying a premium to plug into that growth.
But there's the rub, so to speak. As impressive as the recent past has been, the foreseeable future isn't apt to be nearly as impressive.
Rosenblatt Securities analyst Jun Zhang warned investors late last month that "the market has become too enthusiastic about the upcoming 5G cycle," which has spurred some of the most recent stock speculation from Apple's bulls.
Even without a slow uptake of 5G technology, however, Apple may be poised to disappoint. The budget-minded iPhone that went into production this month and rumored to be available soon will surely draw millions of new users into the Apple ecosystem where they'll spend money on apps and digital content. But, by definition, these will be lower-margin phones sold to consumers who will enjoy a massive number of digital entertainment options -- particularly video entertainment -- that might make them less interested in Apple's digital goods. Investors could face results they're not used to seeing from Apple.
Data source: Thomson Reuters. Chart by author.
The case for, and against, Alphabet
Alphabet, meanwhile, is seemingly facing more than its fair share of regulatory probes, with the Federal Trade Commission announcing this month that it would begin taking closer looks at past acquisitions of companies that weren't publicly traded.
Once again, antitrust concerns seem to be the reason behind the new investigations, though the news fits within a much bigger pattern of probing broadly intended to keep the Google juggernaut contained.
To that end, social and governmental pushback may already be scoring some points against the web-centric behemoth. Google announced last month it would no longer support third-party "cookies" for its popular Chrome web browser, to the delight of privacy hawks. Activists and lawmakers aren't stopping there though, and in the meantime, some of Alphabet's app partners may be testing ways to let app developers bypass Google Play, where app sales generate a commission for Google.
What's largely being missed about Alphabet is that it's already been working toward operating in an era of heavier regulation and more competition.
One example is the more deliberate monetization of its YouTube property. The company's already amassed two million paying subscribers to its YouTube TV skinny bundle and is reportedly mulling the introduction of third-party apps that would allow consumers to access their non-YouTube video subscriptions on the site.
In the meantime, YouTube's advertising prowess is tremendous. It generated $4.7 billion in revenue last quarter just by showing ads before, during, or after videos. That's up 31% from the fourth quarter 2018 total. Google's cloud computing revenue of $2.6 billion trailed YouTube's during the recently completed quarter, but also grew an incredible 53% year over year.
Data source: Thomson Reuters. Chart by author.
The winner is...
It's not an easy choice. But, given all the pros and cons of both names, Google parent company Alphabet is a better pick than Apple right now.
That's not necessarily a call for current Apple shareholders to dump their stakes and add new positions in Google to their portfolio. Tax implications must always be considered, and if any stock can defy the odds, it's Apple.
As it stands right now though, Google appears to have experienced an "aha" moment that sets the stage for lots of things to cheer in 2020. Apple's "aha" largely took shape in 2019, leaving it not as much to tout this year.
