Wall Street’s Insane Treatment of Apple, Google, and Amazon Demonstrated in 9 Charts

| Analysis

A recent theme among the Apple faithful is the mind-boggling inconsistency between the company’s financial performance and its stock price. Although margins aren’t as high, and worldwide market share continues to slip, Apple is still a company that rakes in billions in profit every quarter, and continues to strengthen its position in important markets like the United States. Yet, despite this success, the company’s stock has been on a roller coaster ride for the past two years, while rivals like Amazon and Google have enjoyed relatively steady growth in share value.

Now, thanks to Fortune reader Merckel, Apple supporters and investors have some illuminating charts they can point to while venting their frustrations. As shared by Fortune’s Philip Elmer-Dewitt, the financial comparisons during the past four quarters for Apple, Amazon, and Google are illustrated in nine handy charts.

While there are of course more factors that play into an evaluation of a company’s stock price than these nine items, the charts point to areas that are traditionally at the top of an investor’s list when evaluating a company, and Apple cleans the respective clocks of both Google and Amazon in all of them except stock price.

But Mr. Elmer-DeWitt does point to the key issue: “Judging from Merckel’s bar charts, what the market seems to be saying is that it believes Google and Amazon will keep growing indefinitely.” And that’s clearly the most important factor in explaining Apple’s stock price adventures. Google’s business of ad revenue and Amazon’s virtual shopping mall could grow indefinitely, absent a major shift in the industry.

But Apple’s future, as successful as the company is today, is pegged to its existing products and services. The company can release only so many “S” products, in the mind of investors, before the market and consumers simply move on.

For Apple to regain investor confidence, at least to the levels it enjoyed in 2011 and the first part of 2012, it will have to show that it can redefine a new category, as it did in the past with desktops, laptops, music players, smartphones, and tablets. Whether this future development will be wearable computers, televisions, or something else entirely remains to be seen, but Apple fans are sure that it will happen.

Comments

geoduck

Could it be that the markets are being driven not by people that invest in stocks but by those that trade stocks? The former, and what I was taught investing was supposed to be all about in school, are people that buy a stock of a company they believe in, hold it, take the dividends and then years later sell it for, probably, a higher price than they bought it for. The latter jump in and out of this stock or that stock, trying to make a profit on the continuing shift in prices.

The former group wants a good company that will provide a good return on investment. They want the company, its workers, and the environment to be stable and profitable. To them a company like Apple is a good investment. It makes a good profit, returns a good dividend, has happy customers, and is reliable. A stable profit is their goal. It’s where the old adage “What’s good for General Motors is good for the country” came from.

The latter, want volatility. They are more interested in the stock that might increase a lot. At least they are interested in stocks that they can buy and then convince someone else that it might go up so the price will go up and they can dump it. They don’t care if the company has a workable long term plan, if it makes a good profit now, or even if its customers are happy. They want a pool of stocks that go up and down like floating blocks in a lava pool. As long as they can jump from one to another and convince themselves they won’t fall off and get burned they think they’re ‘winning”. That this can harm other investors, the company, or even the country is irrelevant to them.

To me this idea of two kinds of investors explains a lot of the, what seems to me, utterly stupid things the market does. Like BlackBerry posting a 4bn$ loss and the stock going up. Like Apple posting solid year over year profits on hugely popular products with fantastic customer satisfaction getting hammered for a year because a few analysts kept saying they could not ‘innovate’ any more.

It’s why I don’t trust the market.

FixedOn66

I don’t totally disagree with your assessment but, stock price doesn’t mean beans when comparing two companies. If you looked at stock price only then Berkshire Hathaway, with a stock price of $175,100 per share would be the largest company in the world. (BTW, Its not… Apple is.)

What matters is market capitalization, or Market Cap as its normally called. When looking at Market Cap Apple ($489B) is still larger than Google ($371B) and Amazon ($179B). Not by as much as one would like, but then thats why those of us who think we know Apple’s possibilities should be owners of the company right now.

What is holding Apple’s valuation back at this point is it’s unclear to the market that Apple has another trick up it’s sleeve. Its pretty sure Google and Amazon do. One reason the market gives them better odds of this is that Google and Amazon still have their founders very involved in the business, with the track record of vision and leadership that comes with them. Tim Cook has yet to prove he can do what Steve Jobs did. Until he does, Apple will not see high-flying PE ratios.

Disclaimer: I own shares of AAPL and AMZN

Philip Ershler

Hey there “Gooey Duck”,
  I totally agree with you. I think it is day traders and the like that have messed with Apple Stock prices for quite some time. Apple is a strong enough stock that the “meddlers” know they can always count on going up and down.

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