For Investors (so far) Apple Better Than Google

[qi:053] Remember when Apple’s (AAPL) stock topped the $100 mark, powered by another stellar earnings report? It was only six months ago. Judging from the rapturous reaction in the aftermarket today to Apple’s most recent earnings report, the stock is close to racing past the $200 mark.

Apple closed active trading Monday at $174.36. Following release of its fiscal fourth-quarter results, it shot up as high as $187.76. After market trading can be volatile, but it can often, if not always, be a good gauge of how the stock will fare in official trading the next day. It’s a pretty safe bet Apple shareholders will have a pretty good day Tuesday.

Apple has turned into one of those superstar stocks that seem incapable of disappointing investors. Just add money and watch your returns grow. The last big superstar stock in the tech firmament was Google (GOOG). But Apple seems to be in a higher class of supernova than even Google.

Ever since Google’s first day of trading back in the summer of 2004, Apple’s stock has outperformed Google so that, as of the close of trade Monday, an investor who bought Apple in the stock market on Aug. 19, 2004 would have made twice as much as an investor who invested the same money in Google shares.


applgoog.png

A lot of people have been talking about how Google’s shares have started to rally again after trading in range of $400 a share and $500 a share for months. In the last two months, Google’s stock has risen 27% to an all-time high of $658.49. In that same period Apple has risen 33%. Remember, that’s after Google’s post-earnings rise and before Apple’s.

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So when will Apple see a slowdown the way Google’s did earlier this year? It depends. There really isn’t a lot in Apple’s business operations to suggest a dramatic slowdown in its business. As the earnings call showed, iPods and iPhones are spurring Mac sales, which are likely to spur more upgrades, whether to Leopard or to future generations of iPods and iPhones, and so on.

I think any danger to Apple’s stock is more likely to come from investors themselves. Once a stock is labeled a sure bet to rise, the speculators come running. The top graph above shows Apple’s P/E ratio creeping higher in recent months. Speculation could drive Apple’s price much higher in the near term but add downward volatility longer term. A stock split would only add to speculative volatility.

On the other hand, there is the value of historical perspective can provide. Apple has had Microsoft on the run in key areas. So has Google. But if you compare both those stocks to Microsoft since the 1980s, you get the sense that both of them have a long way to run.

msft vs appl and goog

Now that’s a lot of catching up to do.

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