Two of the biggest tech companies on Earth are constantly jostling for superiority. Apple (NASDAQ:AAPL) has been around the longest — starting life as a computer company — but Alphabet Inc. (NASDAQ:GOOG, NASDAQ:GOOGL) has more tendrils and is more widely entrenched globally. Especially through its ownership of Google. Apple has the spotlight for its premium devices (especially the iPhone), but Alphabet companies dominate everything from online search, to smartphone operating systems, and online video. GOOGL stock is up 145% over the past five years, but AAPL has more than doubled that rate of growth.
If you had to pick, which of the two deserves a spot in your portfolio? AAPL has definitely had the edge over the past five years. But there’s a case to be made that Alphabet may be the better option now for long term growth.
Apple hits $2 Trillion Market Cap, Double Alphabet’s
Poor Alphabet. It seems to best Apple — at least on paper — in so many ways. Android smartphones continue to outsell Apple’s iPhones by a nearly 9-to-1 margin worldwide. Google Nest smart speakers are outclassed only by the Amazon (NASDAQ:AMZN) Echo as the top-sellers globally, with nearly 25% of the market. Apple’s HomePod has less than 5% of that market. Google Assistant routinely trounces Siri as a digital assistant, while Google Maps is still considered to have a wide lead over Apple Maps.
And then there’s internet search. Apple may have its own web browser in Safari, but Google Search dominates online search, and it mints money through ad placements. Google Search generated over $98 billion in revenue for Alphabet in 2019.
However, Apple still comes out ahead. Alphabet’s total revenue for 2019 was $161.9 billion, which sounds incredible. Until you compare that against Apple’s $260.2 billion. In fact, Apple’s iPhone business alone in 2019 was $142.4 billion.
GOOGL stock has increased in value 15% so far in 2020, and the company’s market cap is $1.07 trillion. However, APPL is up a whopping 66% so far in 2020. And last week, Apple’s market cap passed the $2 trillion mark — the first publicly traded U.S. company to do so.
Clouds on the iPhone Horizon
Google also has a line of smartphones in the Pixel, but they’ve never sold particularly well. Android is primarily a strategic play, making sure smartphones use Google services. In other words, if smartphone sales stall, Alphabet doesn’t really care — it’s not making much money on hardware sales. However, Apple is vulnerable.
The company’s annual revenue fell $5 billion in 2019 compared to 2018. Devisions like Services and Wearables were up considerably, but that $142.4 billion in iPhone revenue was actually a big drop from $164.9 billion in 2018. That’s a 13.6% decline in one year. With the global smartphone market maturing, the iPhone is going to be less of a factor in driving AAPL stock value. And there’s no clear replacement in sight. Services, the Apple Watch, and AirPods are all doing very well — but not yet iPhone well.
Bottom Line on the GOOGL Stock vs. AAPL Stock Choice
Which of these tech titans is going to dominate the next decade? Apple could keep riding the iPhone wave for a while yet, and its Services division is beginning to become a revenue powerhouse. Maybe its AR efforts will spawn Apple Glasses that become the next iPhone.
However, Alphabet not only has a strong core lineup, it casts a much wider net than Apple. It takes big risks. Many — like Google Glass — fail to catch on. But by taking risks, Alphabet increases its odds of finding the next big thing.
Google’s core businesses including Google ad revenue and YouTube ad revenue continue to be solid. Android as a platform continues to dominate global smartphone sales. This helps to keep that ad revenue coming in, while also driving Google Play revenue. Alphabet plays like Nest home security and Google Nest smart speakers are proving successful in increasingly “smart” homes. Google Cloud has a bright future as a cloud platform, while the company’s DeepMind AI investment is bearing fruit.
Throw in plays that could pay off big time in the future like Waymo autonomous cars and Verily life sciences, and it could well be that GOOGL stock outpaces AAPL over the next decade.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
