Apple Inc. (NASDAQ:AAPL) was once one of Wall Street’s favored darling, but sentiment has gradually been shifting toward the negative. Instead, many analysts appear to be favoring Google Inc (NASDAQ:GOOG), believing that Apple’s best days are now behind it. But is this actually true? Writing on The Sydney Morning Herald, John Addis of Intelligent Investor Share Advisor runs through the numbers and explains why he is just as bullish on Apple as he is on Google.
Apple’s Tim Cook overly criticized
He notes that approximately 90% of Google Inc (NASDAQ:GOOG)’s revenue is from online advertising and that the search giant has a price to earnings ratio of 25. The company has been showing off wonders like the self-driving car, but Apple Inc. (NASDAQ:AAPL), true to its company culture, has been playing any potential future inventions close to its belt. So investors want to know what’s next for the company.
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Many investors seem to be unhappy with Apple Inc. (NASDAQ:AAPL) CEO Tim Cook because he is pure business. Steve Jobs, on the other hand, represented pure innovation, and the company did slump years ago during the time when he was gone.
Apple versus Google: diving into the numbers
However, it’s now been two years since Cook took the helm at Apple Inc. (NASDAQ:AAPL), and the company’s operating income has risen from $34 billion to $51 billion. When Jobs died, the company reported $108 billion in revenue, but in 2013, the company had $171 billion in revenue.
Google Inc (NASDAQ:GOOG), meanwhile, has been posting smaller numbers. The company’s operating income over the last two years rose $2.3 billion, but Apple Inc. (NASDAQ:AAPL)’s income rose $16 billion. Over the last four quarters. Apple’s total profits were $47.1 billion, while Google’s were a “mere” $10.7 billion. Also Apple’s growing cash pile is now up to $160 billion.
And then there’s the issue of volumes. Apple Inc. (NASDAQ:AAPL) has a small share of the market compared to Google Inc (NASDAQ:GOOG)’s Android, but Apple rakes in more than half of the profit for the sector. This has resulted in Apple’s return on equity to be 30%–double that of Google’s.
Analysts turn bearish on Apple
While many analysts have turned against Apple Inc. (NASDAQ:AAPL), others remain very bullish on the company. Addis’ firm upgraded the company to a Strong Buy, and since then, it has more than doubled and paid out some hefty dividends.
Of course Addis isn’t the only analyst who remains bullish on Apple Inc. (NASDAQ:AAPL). Morgan Stanley’s Katy Huberty has been a long-standing Apple bull, as has Piper Jaffray’s Gene Munster Recently Macquarie analysts initiated coverage on Apple at Outperform. So it would seem that just as they are on most stocks, analysts are split on Apple—certainly more split than Addis would have us believe. Of course there do seem to be more doom and gloom stories about Apple now, but there are still some big names who like Apple, for one, Munster. If he ever turns against Apple, watch out.