Recent events
Apple Inc. (NASDAQ:AAPL) experienced a massive dip in its quarter-over-quarter revenues in the first quarter. A couple of factors at play can be identified for the plunge in the revenue stream. Apple has always been known for its innovative and breakthrough technologies, which the company has not been able to deliver for quite awhile. This resulted in a total of 43% deterioration in the stock value from a record high in September. The share value has declined 24% only in this ongoing financial year.
Apple has been facing stiffer competition from Samsung and Google Inc (NASDAQ:GOOG) backed Android smart phones, resulting in higher levels of iPhone inventories, indicating that Apple Inc. (NASDAQ:AAPL) has been selling fewer iPhones, divergent from the projections. Apple is anticipated to slash its iPhone forecast by as much as 20%, indicating a reduced demand. On the brighter side, Apple Inc. (NASDAQ:AAPL) is expected to launch the iPad 5 in September coupled with an agreement with China Mobile, making the iPhone available to 700 million of its subscribers. Moreover, the company has climbed to sixth in the Forbes Fortune Global 500.
Google is the top web search engine, available to the internet user all across the world. The financials of Google Inc (NASDAQ:GOOG) are very vibrant and radiant, with a continuous increase in revenue. In the most recent quarter, the company experienced a year-on-year as well as a quarter-over-quarter growth in the revenue.
Google is aggressively getting involved in the hardware business providing tough competition to Apple. Now, Google is in the development phase of producing a video game console and a wrist watch based on Android. These would help Google Inc (NASDAQ:GOOG) expand Android’s reach beyond its strong hold in smart phones and tablets. Android, since its inception, has been a hot pick by the masses, featured on three out of every four smart phones.
Moreover, Google is working to build and help run wireless networks to provide internet in emerging markets such as sub-Saharan Africa and South East Asia, connecting around 1 billion people to the internet. This enhances the company’s prospects by many folds, enabling it to generate more profits.
Microsoft Corporation (NASDAQ:MSFT) has been spotted in a fix recently. The company’s new Windows 8, whose demand is basically derived from the PC demand, has seen a sharp downfall. The PC market the world over experienced a plummet when PC sales declined by 13% in the first quarter.
Microsoft Corporation (NASDAQ:MSFT) has tried to compete with Apple Inc. (NASDAQ:AAPL)’s iPad and Android tablet with Windows 8, which is compatible with tablets as well as PCs. The consumers found Windows 8 very confusing and preferred smartphones and tablets over PCs, which resulted in a sharp decline in PC demand.
On the other hand, Windows 8, which was considered to be the company’s most significant update, could only manage to increase the stock value by 3%, not enough to rejuvenate the financial outlook. Furthermore, Microsoft Corporation (NASDAQ:MSFT)’s entertainment and devices division has also suffered a decline in the Xbox game console sales of 11%.
Competition
| Indicators | Apple | Microsoft | |
|---|---|---|---|
| Price/Earnings TTM | 9.9 | 26.2 | 17.8 |
| Price/Book | 2.9 | 4 | 3.7 |
| Revenue Growth
(3 Yr. Average) | 53.9 | 28.5 | 8.1 |
| Net Income Growth
(3 Yr. Average) | 71.8 | 18.1 | 5.2 |
| Return on Equity | 33.3 | 16.3 | 22.6 |
| Dividend Yield | 2.65% | – | 2.59% |
| Current Price | $422.48 | $905.41 | $34.40 |
*Data from Morningstar and Financial Visualizations on July 10, 2013
Analyzing the financial ratios, they tend to be in favor of Apple Inc. (NASDAQ:AAPL). It has very high revenue growth. The income growth rate has also spiked during the past couple of months. Moreover, Apple has always provided their investors with fairly high capital returns. It provides a decent dividend yield as compared to the rest.
On the contrary, Google Inc (NASDAQ:GOOG) does not provides dividends, and the company has reasonably low revenue and income growth figures. The same case with Microsoft Corporation (NASDAQ:MSFT); the company has most of its figures deteriorated as compared to the industry averages.
Final thoughts
The stock value of Apple Inc. (NASDAQ:AAPL) is anticipated to increase 50% soon, after the launch of iPad 5. This device is not just a tweaked design, but a breakthrough product, the notion of which Apple survived ever since. To top the positives is the talks between China Mobile and Apple Inc. (NASDAQ:AAPL), which would amplify the demand of iPhones. All this is expected to boil down to a massive surge in the share value. The revenue and income growth figures are a testament to Apple’s endurance. I believe Apple is an unambiguous Buy.
Marina Avilkina has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT).
The article Which Tech Stock is the Best Buy for Profits? originally appeared on Fool.com.
Marina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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