Will Alphabet Manage To Permanently Overtake Apple?

Alphabet has once again managed to overtake Apple in the markets as the highest valued company in the world.

Alphabet vs. Apple

Apple lost its market capitalization on Thursday when Alphabet successfully managed to overtake Apple as the most valuable company at the end of trading.

Apple finished trading with a value of $494.8 billion, whereas Alphabet snuck in just ahead with a value of $494.9 billion.

Last year there was speculation that Apple would be the first company to reach a market value of $1 trillion, however with Alphabet succeeding to steal Apple’s title, Apple now has a competitor in its mission to reach $1 trillion.

The achieving of the $1 trillion goal is not the first time that Alphabet has managed to overtake Apple.

Alphabet managed to secure the top stop earlier in the year for one trading day, the next day Apple reclaimed the number one position.

It is not the first time that Apple has been in competition.

In 2012, Apple managed to take the title away from Exxon Mobile. The two companies remained in competition throughout 2013 until Exxon pulled away.

Apple had remained unbeaten until Alphabet came along.

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Why has Apple lost the top spot?

Market experts are blaming this new turn of events on the uncertainty around the success of the new iPhone 7 which is rumored to be released late 2016.

There is a significant decline in market confidence surrounding Apple’s ability to achieve sales growth with the introduction of the new model.

This drop in confidence has caused their shares to drop by 14%.

There is also consideration taken for the way Apple and Alphabet conduct their business.

Apple relies heavily on their devices to generate business. They have yet to venture outside of their selection of devices.

Whereas Alphabet, on the other hand, is mainly focused on software and has a broad range of services which have a large user base.

To create long-term revenue Alphabets business model is seen as more sustainable than Apple’s.

What does this mean for Apple and Alphabet?

Currently, there is only $100 million between the two companies, in market terms this is not a huge amount. Apple and Alphabet are virtually neck and neck as far as competition goes.

The biggest difference is the company’s attitude to business. Google play a long game; they are most famous for their search facility, and they offer a broad range of services (from mobile phones to email) using the Google brand alongside it.

Apple, on the other hand, has more innovative and exclusive products, they rely on image and brand loyalty to stay ahead. However, since Apple offers a unique service this leaves them open to being priced out of the market by competitors and their lack of expansion means they have no ‘plan b.'

What goes up must go down

The price of stocks ultimately (like most things) is a victim to supply and demand.

The complexity of the stock market is what fuels the supply and demand.

High company value does not always mean a high stock price.

A company’s stock price often takes into consideration the companies current value as well as the estimated value in the future.

Ultimately –

• Supply and demand heavily influence stock price
• Price x number of outstanding shares = business value
• Earnings are just part of what investors use to evaluate the value and stock price of a company
• Stock prices are ultimately affected by investors expectations, attitudes, and sentiments
• No one can say for certain why stock prices go up and down

There are those that believe you can predict how the stock market will change, and there are those who believe it’s random.

Ultimately the share markets, just like everything, aren’t immune to ups and downs.

Who will win the battle?

It is extremely likely that the two companies will battle it out for some time to come. Alphabet first overtook Apple for a second time on Thursday, and the battle still continued the next day.

Apple managed to raise its value to $501 billion, and Google (Alphabet) fell to $493 billion on Friday.

However, when the markets closed on Friday Apple fell to $484.1 billion, and Google (Alphabet) finished with a market value of $490.9 billion.

Google is seen to have better growth from an investors view. If you look at the price to earnings ratio, Google is trading at 18 times next year’s earnings, whereas Apple is currently trading at a predicted nine times next year's earnings.

But, the price to earning ratio can be a double-edged sword. A massive increase may make you attractive to investors; then investors are likely to turn away.

It is too early to say which company will ‘win.' There are plenty of positives but also a considerable amount of negatives.

Neither Alphabet nor Apple can reliably be considered safe bets.