Love, Hate, And Love To Hate: The Truth Behind It All
Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There are three major tech companies that seem to draw everyone's attention. As with most successful companies, there is controversy about what they do right, wrong, and what they don't do at all. Generally speaking, people (investors in particular) either love what a company is doing or hate it. Let's take a look at where some of these feelings are derived from, and what position they appear to be in for investors.
There is no doubt about it, Apple (NASDAQ: AAPL) has one of the most dedicated customer bases ever. Yet, there are some people that hate everything about the company. Most companies would do anything to achieve more than $13 billion in profits for one quarter, yet some people were disappointed with Apple's results. A lot of people expected more because of how well the company has done in the past, and some people claim it should perform better if it’s such a great company.
With the stock recently hitting two year lows, some people are yelling, "It's over sold, buy Apple now!" While the other portion of people are ecstatic because they think the company is finally beginning to crumble. My thoughts? I think the company's stock has struggled recently, but there is no reason to think the company shouldn't succeed in the future. In the past five years, Apple has seen revenues increase 413% as opposed to Google's (NASDAQ: GOOG) 21% increase. Google's revenues have been up and down the past few years while Apple's has steadily grown.
With over 74% of Google's revenues being derived from search ads, mobile technology hasn't provided the revenues for them as much as for Apple. Approximately 26% of Google's revenues are acquired from mobile search ads, Google phones, and Motorola. For Apple, the iPhone alone consisted of 53% of the company's revenues in 2012. With mobile becoming such a huge demand, Apple seems to be leading the way in that category.
Wednesday morning, Amazon's (NASDAQ: AMZN) shareholders experienced growth that placed the stock at an all-time high. However, it wasn't all good news for the company. Earnings were lower than expected, they lowered guidance, and yet still hit an all-time high. For some reason Amazon's stock seems completely unrelated to its business. While operating margin profitability increased for the company, Amazon's shareholders seem to have the motto "We believe".
Amazon may prove to be the website of the century, but gives no reason to believe it will crash, or sky rocket. The company already has established itself as the omnipresent retailer of the world. Over all, profitability has been decreasing since roughly the mid 2000's.
The biggest plus for Amazon is probably their CEO, Jeff Bezos. He manages expectations better than most, and has quietly become one of the most respected CEOs around. For more than a decade he has sold the idea of a long term business model. Investors seem to be ok with seeing flashes of profitability while he builds the company. Apple's shareholders bought in to this concept long ago, and until recently it drove the company's stock. However, Apple just released its best quarter results ever, and the stock has deflated.
The scariest thing for investors owning Amazon is time. People invest with a timeline of when to get their money back with a return. The company is probably the greatest in the world in the retail industry for pricing and convenience. When a company becomes a low cost provider raising prices becomes very difficult. With sales taxes catching up to Amazon, raising capital becomes Amazon's largest threat.
For bargain investors, Apple, Google, and Amazon's FCF yields are 10.7%, 8.9%, and .9% respectively. Amazon's lack of free cash flow and profitability are shown in that figure. Both Apple and Google seem to be fairly cheap, though Apple edges Google out.
The Foolish Conclusion...
At some point Amazon has to become more profitable. It's stock continues to rise, setting new all-time highs, but the company still struggles to show any profit. Apple has done just the opposite. Continually the company shows large profits and yet its stock decreases. Google falls in the middle land of the two. Amazon baffles me because of its outstanding market share and business model, but its poor performance of profitability. What is Amazon trying to do besides become enormous? Time shall tell.
tlwofford has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, 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!