Quick quiz: Can you name the world’s biggest and second-biggest companies? If you guessed Apple (AAPL) and Exxon Mobil (XOM), respectively, you’d be wrong. Oh, it was the right answer until a few days ago, and AAPL stock still is the top dog in terms of market capitalization. But XOM lost its claim on the No. 2 spot last week to none other than Google (GOOG).
And although it still has a lot of ground to make up before dethroning the world’s biggest consumer technology company, with a little luck and a few more good business decisions, GOOG stock could take the No. 1 spot sooner than later.
Crunching the Numbers: GOOG Stock vs. XOM and AAPL
For perspective, with GOOG stock now priced at $1,190 per share, Google sports a market cap of $399 billion. That’s only a tad bigger than the market capitalization of $393 billion that Exxon Mobil claims with XOM stock valued around $91.
Bigger is bigger, regardless of the degree.
With that being said, with AAPL stock priced at $536 a share, Apple boasts an amazing company value of $478 billion — 20% bigger than its nearest competition. Given how well GOOG stock has been performing of late, however, and given how shaky AAPL shares have been since their late-2012/early-2013 deflation, that positioning could change.
Yes, AAPL stock bounced nicely during the second half of 2013, but between its 40% dip before that bounce and the 13% slide that started in December, the stock’s just not sparking the same kind of buying euphoria it used to incite. GOOG stock can still rally quite well, however, and it has. In fact, it’s the 70% rally since the end of 2012 that has put Google into the No. 2 spot in the first place.
As for whether Google can overtake Apple in terms of market cap, it’s (as always) going to come down to the underlying performance of those companies, and the risk-vs.-reward scenario investors are weighing in their heads.
This is where things get interesting.
Will Google Ever Top Apple?
There’s no denying that Apple has not only set the bar when it comes to personal electronics, but it also has changed the way we think about what handheld electronics can do for us.
However, if you give consumers a reason to always expect more and better from the next device you make, you run up against a problem: Eventually, it becomes very tough to exceed expectations well enough to keep folks buying the next generation of that device.
We’re already seeing some of this effect taking a toll on AAPL stock now. The best derivations the company has been able to come up with of late have been a smaller tablet and a lower-priced smartphone. That’s not the kind of category invention that made Apple great. That’s just retooling, repurposing and repackaging of existing technologies. If Apple can’t come up with something game-changing, and fast, AAPL stock might once again come under fire and lose its No. 1 spot to Google.
But is Google actually doing anything that can keep its growth pace firm enough to let it catch up with the leader of the market cap race anytime in the near future?
Yes, even if it’s not evident.
One of the great parts about doing something as simple and unremarkable as what Google does — connecting Internet users with the websites and web-based tools they want to use — is that you don’t have to constantly impress your customer base. You just have to do more of what you’re already doing. As long as more and more people connect to the web, now through their handheld devices as much as through their computers, Google can just ride the wave of the web’s ongoing proliferation.
That’s not to say the price of GOOG stock is going to reach $1,430 tomorrow and catapult it ahead of Apple when it comes to the companies’ size, nor does it mean the value of AAPL stock is going to slump to only $429 and make Google the world’s largest company simply by default (or some combination thereof).
It does mean, however, that it’s apt to be easier for Google to catch up to Apple than it will be for Apple to maintain its lead over Google…
…not that size matters.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.