Are Apple and Google Stock Screaming Bargains?

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Hunting for tech stocks to buy can be both fun and frustrating, as there are plenty of headlines to soak in about all the supposedly world-changing innovations come out of new and established companies in the space. Of course, that also means plenty of noise to sort through.

And, while tech undoubtedly has a huge impact on our world — which means stocks in the sector often come with over-sized growth prospects — investors are forced to shell out a premium to bet on that potential.

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It takes just a quick sampling of some of the hottest tech stocks out there to illustrate this reality. Even Facebook (FB), which has been transitioning from a new kid on the block to an established, proven company, is trading for more than 30 times its expected 2016 earnings. And, that’s just a fraction of the forward P/E ratio that comes with picks like Twitter (TWTR), Tesla (TSLA), and Amazon (AMZN).

Amazon is a prime example of a tech stock whose investors are willing to forego profits for potential. AMZN is up almost 40% this year, putting its premium at a mind-boggling 167 times estimated forward earnings.

But, as the below sample also shows, two of the biggest names in the space — which each just had big-time events, never have a shortage of big-time news, and boast big-time footprints — are actually trading at a relative discount right now. And, a forward P/E of 13.3 is especially impressive for Apple (AAPL) stock, which has been a steady out-performer so far in 2015. Since Jan. 1, shares of AAPL have posted a 17% run vs. a 7% climb for the broader Nasdaq.

If the relative discount of Apple stock and Google (GOOG, GOOGL) stock still doesn’t seem impressive, another quick sampling should help put it in perspective. If you screen for tech stocks by forward P/E ratio, take a look at the below list of some of the biggest names that come up.

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While other tech stocks indeed have lower or comparable forward P/E ratios, they also sport discounts for more obvious reasons. With picks like Intel (INTC), Hewlett-Packard (HPQ), Cisco (CSCO) and Oracle (ORCL), you have an army of stodgy tech giants that aren’t cool enough to be in with the Silicon Valley crowd.

Meanwhile, Apple just stole the show in San Francisco with its WWDC event, while Google was recently center stage thanks to its Google I/O event — two anecdotal, but relevant, proof points of the “buzz factor” surrounding these two cheap picks.

Of course, buzz is hardly an investment thesis — but in this case, there’s indeed a correlation with growth projections. From the sample above, only Yandex (YNDX) sports higher projected five-year earnings growth vs. Apple and Google, and that’s because it’s coming from a low base. Earnings have been nosediving: YNDX has declined 18% this quarter, is slated to decline 14% next quarter and is on track to tally a total of 8% decline this year.

That’s why Apple stock and Google stock sport the lowest PEG ratios on this list of tech stocks — and why they could very well be your best bet if you’re interested in the sector. Sure, there’s a lot of chatter, good and bad, around both names right now in the wake of their events and the accompanying announcements.

But to a large degree, the annoying moniker “no press is bad press” is true here. There are always going to be naysayers when Apple and Google announce anything, because they remain two of the biggest and most relevant names in the tech world. Everyone’s talking about Apple Music and additions to the iPad right now thanks to WWDC, while Google just captured the tech media’s attention yet again, this time with plans to get into the urban planning business.

No other company boasts that level of buzz, footprint, growth potential and swag for the price.

As of this writing, Alyssa Oursler was long FB.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/06/apple-google-stock/.

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