Both Facebook Inc (NASDAQ:FB) and Apple Inc. (NASDAQ:AAPL) are presenting compelling valuations to invest, and there is close competition between numbers and developments in both companies. Facebook has some positive developments, but numbers are not that impressive, while Apple has a strong balance sheet but does not have sufficient strength to back the share price.
So, of the two, which one is a smarter pick for better returns? This intriguing question has been answered through a report from MarketWatch by Jeff Reeves.
At the end of last week, Bruce Greenwald, the founding director of the Heilbrunn Center for Graham and Dodd Investing at Columbia Business School, sat down for a Fireside Chat with Li Lu, the founder and chairman of Himalaya Capital as part of the 13th Columbia China Business Conference. The chat spanned many different topics, Read More
Facebook a bit too pricey
Facebook Inc (NASDAQ:FB) was in the limelight recently as the shares crossed $45 to set an all-time high, balancing the losses of those investors who bought it at an intraday high immediately after the company’s 2012 IPO.
Facebook Inc (NASDAQ:FB)’s margins were following a slight uptrend in the latest earning report, but were expected to decline in the longer term. Non-GAAP margins in the second quarter of 2011 were 53 percent, 43 percent in the second quarter of 2012 and 44 percent in the second quarter of 2013. Trends of declining margins in the long term is evident. Additionally, on average, 70 percent of users actively connect with Facebook on mobile devices and mobile ad segments, which contributes only 30 percent of all ad revenues.
Facebook Inc (NASDAQ:FB) is seeing declining trends among users in the western market, though the mobile users have increased significantly. In the United States and United Kingdom the user base is declining. Facebook has swiftly and impressively transformed on mobile devices, which expanded from a user base of 293 million in the second quarter of 2012 to 469 million in the corresponding quarter of 2013.
According to the author, Facebook at $20 to $30 would have been a buy, but at current levels it looks a bit expensive.
Apple a good stock to invest in
Apple Inc. (NASDAQ:AAPL) recently launched the iPhone 5S and iPhone 5c. However, the launch failed to attract the interest of Wall Street and analysts. Research firms like Bank of America, Merrill Lynch, Credit Suisse and UBS downgraded the stock to neutral because they hold the view that the low-cost iPhone is actually not cheap enough. Shares of the company declined below $500 mark.
Apple Inc. (NASDAQ:AAPL) has witnessed a decline in its bottom line for two straight quarters, and is expected to record an EPS growth of just 5 percent in 2014 according to S&P. The expected surge is not up to the standard of Apple. From the gadget front, Apple’s iPad is losing the traction against other cheaper tablets like the Kindle. Towards the end of 2010, 73 percent of tablets shipped were Apple, and last quarter it was just 32 percent of total tablet sales.
However, in the long term Apple is a good stock in every sense to invest despite its not-so-aggressive earnings and cold development of products. Apple’s operating cash flow stands at a massive $50 billion, and with a dividend of 2.4 percent coupled with massive buyback plans, the stock surely looks stable and less risky.