I find it interesting that GOOG is valued higher than XOM considering that GOOG basically only provides an internet search engine versus a product that is required for modern day civilization. Only a search engine? They provide also operating systems (Chome Android), various media platforms and programs (YouTube, Picasa), mapping services (Google Maps), email (Gmail), social networking, news, and the list goes on.
GOOG might surpass AAPL in capitalization, but I have a feeling that GOOG will then drop like a rock similar to AAPL. Capitalization matters, but is largely dependent upon assets. Profits matter more to investors, and stock price is drive by not only current profits, but expectations and stability of future cash flows.
Albeit AAPL is still number one. I am not sure why investors are in love with GOOG. Google trades at a higher multiple for two reasons: 1) Profit growth has been more robust/predictable as of late, and 2) Profits going forward are perceived as more stable. Even if a massive new competitor took the market by storm, Google's profit decline would be slow, not sudden, as they are so broadly diversified and ingrained in the data traffic business. Apple, on the other hand, could see a precipitous decline if margins dropped just 5% and/or a single product - the iPhone - started to lose sales. |
