Has This Tech Titan Lost Its Way?
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Every year Fast Company lists the 20 most innovative companies and Apple was outranked by several publicly traded companies: Nike at number one, Amazon (NASDAQ: AMZN) at two, Splunk (NASDAQ: SPLK) at four, Target at ten and Google (NASDAQ: GOOG) at 11 with Apple (NASDAQ: AAPL) trailing at 13.
Mired in the doldrums?
Each of these companies' stocks has performed better than Apple and in these doldrums that Apple has been sailing in seemingly forever, one has to wonder if their North Star truly was Steve Jobs.
With few tailwinds and plenty of headwinds how much longer before Apple shareholders and activist investors mutiny? How much longer will they grumble below decks, "When is Apple's "Next Big Thing" coming out?"
I've been an Apple fangirl for some time, but where is the Apple TV, the one that is supposed to change the way we watch TV forever, I ask you? The iWatch? Both are under construction but unlike a real construction site, there's no window to watch men at work. Of course, that's part of Apple's secretive nature.
From patent applications and hiring of haute couture names we know the iWatch is underway but have no clue to a timeframe. There have even been rumored problems of employees trying to jump ship according to the Financial Times including a senior worker on the iWatch.
The Fast Company inclusion of Apple was for its iPad retina display, nice but not disruptive. The share price will probably tread water as more innovative companies' share prices soar.
Should you sail along with Splunk?
Splunk, the Big Data name that has moved up 78% this last year and has almost doubled from its 52 week low in November. Fast Company also named Splunk the top innovator in Big Data.
Splunk has been reporting losses with 2014 Q1 non-GAAP loss of $0.06 per share and the forward P/E at 422.67 is even higher than Amazon's 96.7. The company did raise guidance for FY 2014 revenues but non-GAAP margin is expected to remain at the previously guided range of zero.
This software application company is the correlator/aggregator/translator of eyeballs on the internet, customer complaints, and financial transaction, what is otherwise called "Big Data", for its customers which have been growing by 20-30% every year. Their industry has favorable headwinds as well with the demand for Big Data expected to grow revenues from $9.7 billion for the industry in 2013 to over $16 billion in just three years.
The company has one particularly formidable competitor in IBM, a time proven proposition with yield, a trailing P/E of 13.25 and a PEG of only 1.19. However, analysts really like Splunk with 1 Strong Buy, 13 Buys and 5 Holds even after it surpassed its median price target of $50.00. The short interest is growing which isn't surprising but it is surprising it's only 5.40%.
Sailing ahead of their rivals
However, reporting losses or razor-thin margins (1.04%) hasn't stopped Amazon from running 42% higher this last year. I've said before Amazon is a "willing suspension of disbelief" stock in that it has yet to make real money and is willing to sacrifice margins for an indeterminate amount of time as it brings customers on board its Prime system to buy anything e-commercial and stream content, hopefully on a Kindle Fire.
Its customer-centric philosophy and Cap'n (CEO) Jeff Bezos has kept the true believers in line as the stock crossed $300 for an all-time high on July 12.There's almost no other stock that generates this conviction in its future possibilities. Everyone knows one day that they will make money but no one seems to care when.
Amazon is a compelling story, the most compelling being why it ranked number two among the most innovative companies... its expedited delivery (with same day shipping in some cities) of their special smiley boxes everyone loves to receive. (See Lindsay Kratchowill's informative timeline on how Amazon upped the delivery game for everyone, including rivals eBay and Wal-Mart.)
That said, Amazon sails from swell to swell each earning season offering a heckuva ride like that in The Perfect Storm. While EPS growth has been -13.58% for the past five years per annum, going forward it is expected to exceed 36%. That easily bests analysts' predictions for Apple's five year EPS growth at 20.88%.
The Titanic of tech titans?
The last few years Google was like the Titanic of tech; it could do nothing right. Now it can do nothing wrong with the share price surging 60% and hitting an all-time high of $923.00 on July 12.
Analysts see five year EPS growth at 15.00%, not as good as Apple, and the PEG at 1.33 is higher than Apple's .52. Unlike Splunk and Amazon, Google has an operating margin of 26% and operating cash flow of $16.56 billion.
Google keeps powering along the internet seas with its Google Fiber, their best new hope to wire America which they started in Kansas City and the rationale for their Fast Company listing. Frankly, I wish they had it where I live so I could be part of the "fiberhood."
And this is only among dozens of Google's bright ideas and numerous investments in tiny startups and smaller tech companies. Of five important tech trends, Google is involved in three of them including social networking with Google Plus gaining share, mobile wallet, and wearable tech with Google Glass. Google's position is number one in search and has dominant position for Android on 69.7% of smartphones globally as of Q4 2012. Apple's iOS was on 20.9% according to Gartner.
Google is trading at a trailing P/E of 27.62 with a forward P/E of 17.32 compared to Apple's trailing 10.18 and forward 9.80. And yet, Google rises with Apple stock price sinking 29.72% in 52 weeks despite Apple's 2.90% yield and 30.92% operating margin.
Who will you sail with off into the sunset?
Amazon, Google, and Apple are reporting earnings soon. Long-term investors in Amazon and Google will take any squalls in stride. Apple, however, will need Captain Tim Cook to signal they are moving in the right direction full speed ahead. Splunk is a speculative up and comer. Have a life jacket handy.
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AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!