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Category: Nasdaq, Apple (APPL), Amazon (AMZN) and Alphabet (GOOGL)
Date: 3 August 2020 Stock price of Alphabet: $1487.95 Stock price of Amazon: $3164.68 Stock price of Apple: $425.04 In our continued stock comparison articles we compare the stock of thee of the largest tech firms in the world, all three of which is listed on the NASDAQ. We compare the stock performance of Alphabet (GOOGL), Amazon (AMZN) and Apple (APPL) over the last couple of years as well as looking at who is best placed to provide superior returns to investors in coming years.
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So is there any particular reason why the stock of Amazon has outperformed that of Apple and Alphabet so significantly? Or why the stock of Alphabet has underperformed so badly against Amazon and Apple? And does the underperformance of Alphabet provide a good buying opportunity compared to Amazon and Apple? And is Amazon's stock run totally overdone and is it due a strong correction?"
More About Alphabet (GOOGL)
Alphabet is a collection of businesses — the largest of which is Google. We report all non-Google businesses collectively as Other Bets. Our Other Bets include earlier stage technologies that are further afield from our core Google business. We take a long term view and manage the portfolio of Other Bets with the discipline and rigor needed to deliver long-term returns. Each of our businesses are designed to prosper through strong leaders and independence.
Google’s core products and platforms, such as Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube each have over one billion monthly active users. As the majority of Alphabet’s big bets continue to reside within Google, an important benefit of the shift to Alphabet has been the tremendous focus that we’re able to have on Google’s many extraordinary opportunities.
Overview of Alphabet (GOOGL) latest earnings report
Our latest stock valuation of Alphabet: $1240.20
Google’s core products and platforms, such as Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube each have over one billion monthly active users. As the majority of Alphabet’s big bets continue to reside within Google, an important benefit of the shift to Alphabet has been the tremendous focus that we’re able to have on Google’s many extraordinary opportunities.
Overview of Alphabet (GOOGL) latest earnings report
- Revenue: $38.297 billion (down from $38.944 billion for the same quarter of the previous year)
- Revenues decreased by -1.6% over the last 12 months
- Total costs and expenses: $31.914 billion (up from $29.764 billion for the same quarter of the previous year)
- Total costs and expenses increased by 7.2% over the last 12 months
- Some margin squeeze for Alphabet with its costs and expenses growing at about 7% while revenues declined by almost 2%
- Net income: $6.959 billion (down from $9.947 billion for the same quarter of the previous year)
- Diluted earnings per share: $10.13 (down from $14.21 for the same quarter of the previous year)
- PE ratio of Alphabet:
- Diluted number of shares outstanding: 697.024 million (down from 699.954 million for the same quarter of the previous year)
- Cash and cash equivalents :$17.742billion
- Cash and cash equivalents per share: $25.45
- Cash and cash equivalents makes up 1.7% of the group's market capital
- Cash and cash equivalents makes up 6.4% of the group's total assets
- Cash and cash equivalents per share: $25.45
- Accounts receivable: $21.201 billion
- Accounts receivable makes up 7.6% of total assets
- Goodwill of Alphabet: $20.824 billion
- Goodwill per share: $29.10
- Goodwill makes up 2.4% of Alphabet's market capital
- Goodwill makes up 7.5% of Alphabet's total assets
- Goodwill per share: $29.10
- Stockholders equity in Alphabet: 207.322 billion
- Stockholders equity per share: $294.43
- So Alphabet is trading at 5.05 times its stockholders equity per share which is outside the expected range of between 2 and 4 times that most firms tend to trade at
- For perspective the average price to book value of firms in the S&P 500 is 3.7. Read more about the S&P500 here
- Cash generated from operations: $13.993 billion
- Cash generated from operations per share: $20.07
Our latest stock valuation of Alphabet: $1240.20
More About Amazon (AMZN)
Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered by Amazon.
Amazon is currently one of the worlds largest companies in terms of market capital. And it forms part of the famed "FAANG" stocks. FAANG is an acronym for Facebook, Amazon, Apple, Netflix and Google.
Overview of Amazon (AMZN) latest earnings report:
Our latest stock valuation of Amazon: $1480.20 a stock
Amazon is currently one of the worlds largest companies in terms of market capital. And it forms part of the famed "FAANG" stocks. FAANG is an acronym for Facebook, Amazon, Apple, Netflix and Google.
Overview of Amazon (AMZN) latest earnings report:
- Net sales: $88.912 billion (up from $63.404 billion from the same quarter of the previous year)
- Net sales increased by 40.2% over the last 12 months
- Operating expenses: $83.069 billion (up from $60.320 billion for the same quarter of the previous year)
- Operating expenses increased by 37.7% over the last 12 months
- Some margin gains for Amazon as net sales increased at a faster rate than their cost and expenses
- Net income: $5.243 billion (up from $2.652 billion for the same quarter of the previous year)
- Diluted earnings per share: $10.30 (up from $5.22 for the same quarter of the previous year)
- PE ratio of Amazon:76.3 (this compared to the PE of the SP 500 around 23)
- Diluted weighted-average shares outstanding: 509 million (up from 503 million for the same quarter of the previous year)
- Cash and cash equivalents: $37.466 billion
- Cash and cash equivalents per share: $73.60
- Cash and cash equivalents makes up 2.4% of Amazon's market capital
- Cash and cash equivalents makes up 16.02% of Amazon's total assets
- Cash and cash equivalents per share: $73.60
- Inventories: $19.577 billion
- Inventories makes up 7.6% of Amazon's total assets
- Accounts receivable: $19.918 billion
- Accounts receivable makes up 7.7% of Amazon's total assets
- Stockholders equity of Amazon: $73.728 billion
- Stockholders equity per share: $144.84
- Amazon is trading at 21.2 times its stockholders equity which is well outside the expected range of between 2 and 4 which most companies tend to trade at.
- Cash generated from operations: $20.606 billion
- Cash generated from operations per share: $40.48
Our latest stock valuation of Amazon: $1480.20 a stock
More About Apple (APPL)
Apple is one of the worlds biggest smart phone and related accessories makers with the group manufacturing the iPhone, iPad, Macbook (laptops for those that don't know), Apple Watch and other related products and services. The group is starting to focus more and more on their services offering such as cloud services for their device users and services such as iTunes.
Overview of Apple's latest earnings report
Apple sales by product type and category for the 3rd quarter of 2020:
Our latest stock valuation of Apple (APPL): $247.90
Overview of Apple's latest earnings report
- Sales of Products $46.529 billion (down from $42.354 billion for the same quarter of the previous year)
- Sales of Products increased by 9.8% over the last 12 months
- Sales of Services $13.156 billion (up from $11.455 billion for the same quarter of the previous year)
- Sales of Services increased by 14.8% over the last 12 months
- Total cost of sales: $37.005 billion (up from $33.582 billion for the same quarter of the previous year)
- Total cost of sales increased by 10.2% over the last 12 months
- Margins remained pretty constant as sales and cost of sales grew at very similar rates
- Operating income: $13.091 (up from $11.544 billion for the same quarter of the previous year)
- Net income $11.253 billion (up from $10.044 billion for the same quarter of the previous year)
- Diluted earnings per share: $2.58 (up from $2.18 for the same quarter of the previous year)
- PE ratio of Apple: 28.2
- Dividend declared: $0.82
- Dividend yield: 0.9%
- Number of shares in issue: 4.354 billion (down from 4.601 billion for the same period of the previous year)
- Cash and cash equivalents: $33.383 billion
- Cash and cash equivalents per share: $7.67
- Cash and cash equivalents makes up 1.9% of Apple's market capital
- Cash and cash equivalents makes up 10.5% of Apple's total assets
- Cash and cash equivalents per share: $7.67
- Accounts receivable, net: $17.883 billion
- Accounts receivable makes up 5.6% of Apple's total assets
- Inventories: $3.978 billion
- Inventories makes up 1.25% of Apple's total assets
- Total stockholders equity in Apple: $72.282 billion
- Stockholders equity per share in Apple: $16.60
- Apple is trading at 23.2 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at. This ratio should raise alarm bells for investors and does point to how inflated APPL's stock price is.
- Cash generated from operations (for the 3 quarters of fiscal 2020): $60.098 billion
- Cash generated from operations per share (for the 3 quarters of fiscal 2020): $13.80
Apple sales by product type and category for the 3rd quarter of 2020:
- iPhone $26.418 billon (up 1.6% from $25.986 billion for the same quarter of the previous year)
- Mac: $7.079 billion (up 21.6% from $5.820 billion for the same quarter of the previous year)
- iPad: $6.582 billion (up 31% from $5.023 billion for the same quarter of the previous year)
- Wearables, Home and Accessories: $6.450 billion (up 16.7% from $5.525 billion for the same quarter of the previous year)
- Services: $13.156 billion (up 14.8% from $11.455 billion for the same quarter of the previous year)
Our latest stock valuation of Apple (APPL): $247.90
Alphabet (GOOGL) vs Amazon (AMZN) vs Apple (APPL) stock over the last 5 years
The image below shows the stock price performance of Alphabet (GOOGL) , Amazon (AMZN) and Apple (APPL) over the last 5 years. All three firms are major tech firms listed on the NASDAQ and has been for a large part been responsible for the NASDAQ outperforming other major US stock market indices such as the Dow Jones and the S&P 500. The summary below shows the returns of the three stocks:
- Amazon (AMZN): 510.51%
- Apple (APPL): 276.41%
- Alphabet (GOOGL): 122.76%
So is there any particular reason why the stock of Amazon has outperformed that of Apple and Alphabet so significantly? Or why the stock of Alphabet has underperformed so badly against Amazon and Apple? And does the underperformance of Alphabet provide a good buying opportunity compared to Amazon and Apple? And is Amazon's stock run totally overdone and is it due a strong correction?
So who is best positioned for future stock price growth? Apple, Amazon or Alphabet
One of our key metrics is the Price to Stockholders equity per share ratio. When looking at this we find the following:
Based on this metric Alphabet offers far more value than Amazon and Apple. Most firms tend to trade at a ratio of between 2 and 4 times its stockholders equity per share. What it shows that if a firm was to be liquited now, all assets sold, liabilities paid and the rest paid out to stockholders, that amount is expressed as a ratio to the stock price.
Next up cash as percentage of stock price:
Next up lets take a look at the percentage cash on the balance sheet makes up of each group's total assets:
PE ratio:
Apple has the lowest PE ratio and Amazon by far the highest
Price/Valuation ratio: This ratio is the current stock price divided by our latest valuation price for each stock
So based on this Alphabet offers the most value right now, but its still almost 20% more than our target price, while Amazon is trading at more than double our valuation price and Apple roughly 71% our valuation price.
- Price/Stockholders equity per share for Alphabet: 5.05
- Price/Stockholders equity per share for Amazon : 21.2
- Price/Stockholders equity per share for Apple : 23.2
Based on this metric Alphabet offers far more value than Amazon and Apple. Most firms tend to trade at a ratio of between 2 and 4 times its stockholders equity per share. What it shows that if a firm was to be liquited now, all assets sold, liabilities paid and the rest paid out to stockholders, that amount is expressed as a ratio to the stock price.
Next up cash as percentage of stock price:
- Cash as percentage of stock price for Alphabet: 1.7%
- Cash as percentage of stock price for Amazon: 2.4%
- Cash as percentage of stock price for Apple: 1.9%
Next up lets take a look at the percentage cash on the balance sheet makes up of each group's total assets:
- Cash as percentage of stock price for Alphabet: 6.4%
- Cash as percentage of stock price for Amazon: 16.02%
- Cash as percentage of stock price for Apple: 10.5%
PE ratio:
- PE ratio of Alphabet: 35.6
- PE ratio of Amazon: 76.3
- PE ratio of Apple: 28.2
Apple has the lowest PE ratio and Amazon by far the highest
Price/Valuation ratio: This ratio is the current stock price divided by our latest valuation price for each stock
- Price/Valuation ratio of Alphabet: 1.19
- Price/Valuation ratio of Amazon: 2.13
- Price/Valuation ratio of Apple: 1.71
So based on this Alphabet offers the most value right now, but its still almost 20% more than our target price, while Amazon is trading at more than double our valuation price and Apple roughly 71% our valuation price.
So taking all the above into consideration who comes out on top? Alphabet easily takes out the win in our first metric and the last metric we looked at and has the second lowest PE of the companies we are looking at, while Amazon has the highest PE ratio and trading the furthest away from our valuation but has the strongest cash position when looking at the cash as percentage of total assets. Apple has the lowest PE ratio and second best cash as percentage of total asset ratio but it has worst Price/stockholders equity per share ratio.
Taking all the above into account, the respective market positions, product offerings, stock price returns provided over the last couple of years and difference between the stock prices and our valuation prices we rate the stock of Alphabet as the WINNER in the battle of the Nasdaq tech heavy weights.
Taking all the above into account, the respective market positions, product offerings, stock price returns provided over the last couple of years and difference between the stock prices and our valuation prices we rate the stock of Alphabet as the WINNER in the battle of the Nasdaq tech heavy weights.