Following the release of its Q4 earnings earlier this week, Alphabet saw it stock prices surge to upwards of $800, increasing by 8 percent thanks to its strong earnings report. This jump on Alphabet’s part caused the company’s market capitalization to increase as well, rising to over $540 billion. This increase meant that Alphabet surpassed Apple to become the world’s most valuable company. Two days later, however, Alphabet’s stock has fallen back down, giving the crown of the world’s most valuable company back to Apple.
At close today, Alphabet was trading at $726.95, a decrease of 4.93 percent compared to yesterday, giving it a market capitalization of $499.94 billion. Apple, on the other hand, increased by 1.98 percent and was trading at $96.35 at close, giving it a market capitalization of $534.22 billion.
Apple originally became the world’s most valuable company back in 2011 when it passed up Exonn Mobile.
Alphabet’s drop today can somewhat be attributed to an overall rough day for the tech sector. Tesla, Yahoo, Netflix, Amazon, and Alphabet all closed down compared to their previous day’s performance.
This likely won’t be the last time we see Apple and Alphabet flip-flop between carrying the title of the “world’s most valuable company,” but with earnings having already been reported for the most recent quarter and investors settling in, it could be a while before Alphabet is able to capture the title back. Things could vary, however, depending on how investors react to Apple’s announcements during its upcoming March event for the iPhone 5se, iPad Air 3, and new Apple Watch bands.
(Image: AP Photo/Rick Rycroft)
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I knew Apple would regain this title back! I’m more surprised that it took such a quick time!
It closed ahead yesterday too, even in yesterday pre market trading and at the end of Monday’s after hours trading Google was behind Apple. Only briefly during normal trading hours was Google ahead of Apple in market cap.
I wish we could still skip the term most valuable company. The market cap does not equate to the value of the companies.
The long GOOGL short AAPL trade has been a popular paired trade among some hedge funds in recent years. If you look at a 5-year chart comparing the two stocks you’ll notice that the two stocks are often moving in different directions as the trade gets wound up or unwinds and reverses.
Momentum, not fundamentals, is the main force behind Google’s recent surge past Apple in terms of market cap. There’s a good chance that the trade will unwind now that this psychological milestone has occurred. Nothing is guaranteed in the market in the short term. Long term, buying Apple, with it’s 10% return (P/E of 10) makes more sense than buying google’s 3% (P/E of 30) with growth rates being far from certain for either company.
Steve Jobs was always blaming hedge funds for Apple’s low valuation.
Really? No fundamentals at play? Let’s see, one company makes “luxury computer hardware” that cashes in the novelty of the smartphone segment, a concept that will relegate them to a niche player in a decade or so, while the other company seeks to have a monopoly on EVERYBODY’S eyeball and is pretty much succeeding. To me, the fundamentals clearly point to a tortoise and the hare scenario, with Apple being the hare.
Google tries everything and fails everything: see Nest, G+, etc…
They are a bourgeois company living on the ad business that wasn’t even created by then, but bought a company.
As long as the stock price change a lot for the stock players :)
How stupid that people rushed out this story. Their respective market caps are too close. They’ll probably go back and forth for awhile until one takes off again.
Apple is now more ahead of Google than yesterday Google was ahead of Apple.
From Seeking Alpha:
While Wall Street rushed to raise its price targets higher and higher, most seemed to ignore some key problems with this report.
Everyone loved the big beat on the bottom line, with the company reporting non-GAAP EPS of $8.67 versus a Street estimate of $8.10. However, the company received a big benefit from a one-time item detailed in the press release as follows:
For Q4 2015, our effective tax rate reflects impact of certain one-time items in the U.S., specifically the resolution of a multi-year audit with an ETR impact of 9%, as well as the full year impact of the R&D tax credit with an ETR impact of 8%.
For Q4, Alphabet had an effective tax rate of 5%. For all those who criticize Apple for its tax situation, Alphabet should receive some flak. For the quarter, the company had GAAP net income growth of just 5%, and that included the tremendous tax benefit. Had the tax rate been equal to the year-ago period, Alphabet would have likely reported at least a $400 million decline in net income.
The bottom-line issue shows how Google could be in trouble if it doesn’t keep spending in check. For the full year in 2015, GAAP gross margins rose by 137 basis points, but the company’s net profit margin rose by just 38 basis points, and that included the big tax break. Had the tax rate stayed constant, Google’s net profit margin would have dropped by roughly 74 basis points year over year. With the tax rate most likely returning to a more normal rate in the coming years, the company’s margins will become a big issue.
As I write this article, Alphabet is trading at about 23 times expected non-GAAP EPS for this year. If you shift that valuation to GAAP, you are around 28 times. Apple trades for just 10.5 times earnings, with a number of other large tech giants trading in the teens.
Looks like some people cashed in on the media hype.
There are a lot of big investors out there betting against Apple and are happy to see it fall. It’s pretty stupid because Americans don’t need any more failing companies. Apple is still opening stores and hiring employees. We need companies like that instead of the ones laying off employees. On the internet there are always people trying to trash Apple by openly telling potential investors not to buy Apple stock. I can understand people telling investors to buy such and such stock but to deliberately telling them not to buy stock in a company is just wrong. Just because Apple lost its top market cap crown, how much does that hurt Apple? Hardly at all. Apple is still making plenty of money and a mountain of reserve cash. Sticking a high multiple on a company doesn’t mean it’s doing well. Investors hoping for a strong future doesn’t mean it’s actually going to happen. Plenty of companies have had high multiples and failed when things didn’t turn out as planned.
What a company needs is a strong balance sheet and no matter how much Wall Street hates Apple it’s not going to hurt the company. Apple only needs customers willing to continue buying their products year after year. That has not changed. Every company can hit a wall but almost always has a chance to break through it. If Wall Street wants to give Apple the “kiss of death” then that’s up to them. It might hurt Apple’s overall valuation on Wall Street but as long as Apple’s books are kept well into the black then everything is just fine. Wall Street darling stocks come and go, so no company is guaranteed to stay a darling forever. Let’s see how long Alphabet stays a darling before the big investors start looking for some other company catches their attention.
Let Google have their top market cap crown if they want it so badly. No company holds onto it forever and there must have been plenty of companies who had the crown and have faded to dust over the years. I’d rather see Apple last a long time as a company than always having the top market cap crown. There’s at least some bragging rights to have it at one point but that far less important than keeping the company going strong for a long time. Big investors don’t care anything about companies. Their only interest is stuffing their own pockets at the company’s expense.
Well said :)
when google moved slightly ahead in market cap, the bloomberg tv streaming app was giving it wall to wall coverage
That photo looks like its from the George Street Sydney Store :-)