Google Inc (GOOG), Apple Inc. (AAPL): Africa Is Tech’s Next Frontier

In order to maintain its current profit margin of 23.5% and earnings before interest and taxes (EBIT) margin of 31.5%, it will be forced to sacrifice potential growth in emerging markets. With a return on investment (ROI) of 29.3% Apple Inc. (NASDAQ:AAPL)is still a very profitable company, but Google’s low cost Android is simply a better product for price conscious consumers.

Social Networking Won’t be Left Out

Facebook Inc (NASDAQ:FB) is growing in Africa. The continent is the second largest in the world and Facebook Inc (NASDAQ:FB) is a great way for to people to communicate across national borders. The social networking giant needs to take a long term view. Africa’s low per capita GDP means that it is unlikely to provide a substantial and immediate boost to Facebook’s revenue. The long run is a different story, as Africa’s internet use and population are expected to grow for decades.

Facebook is still in its growth phase. Its quarterly year over year revenue is up 38%, though its U.S. user growth has tapered off. Regardless, the company has decided to plow most of its profits back into the company. Its ROI 0.5% and profit margin of 1.2% are not sustainable in long run, but Wall Street expects that it will be able to boost its 2014 EPS to $0.58. As the developed Western markets settle down, Africa will be a precious source of growth for Facebook.

Conclusion

Africa is on the rise, and improvements to its internet backbone are paving the way for Google and Facebook to benefit. African growth will help boost their earnings, as growth in more developed markets taper off. Apple Inc. (NASDAQ:AAPL) will have a hard time in Africa. Its expensive products are a hard sell to price constrained consumers.

The article Africa Is Tech’s Next Frontier originally appeared on Fool.com.

Joshua Bondy has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, and Google. The Motley Fool owns shares of Apple, Facebook, and Google. Joshua 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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