Why It's Time to Buy Google, Apple 30 comments
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I am currently on vacation and my Internet connectivity is intermittent at best. However, I feel compelled to write that I think Google (GOOG) and Apple (AAPL) are currently worth buying.
Google, with its Chrome browser has taken a critical step toward the application software market. They are looking for the desktop interface to be completely replaced by a browser. To that effect, Chrome has an exceptionally robust, yet simple interface. The limited testing that I have done myself shows Chrome to be faster and much more stable than Microsoft's (MSFT) IE 7, which now holds over 70% of the browser market, with Firefox a distant second with over 20% and Apple's Safari with 6%.
While Chrome has a very long way to go, its purpose is to allow businesses to run remote applications via the browser and run them fast. Conceptually, this design is a stride in the right direction as more and more enterprise software has moved from desktops to web-client architecture.
So is Chrome my only reason for recommending Google? Heck no! The stock has almost halved over the last 12 months and all because advertising has been affected by a weak economy. Google's earnings growth is slowing down as evident from their miss last quarter. I think the 50% decline in Google's stock price is unjustified considering it is still number one in search and despite the slowdown, their earnings are still growing and at a good pace. The current economic climate will change in a year or so, but this stock at $400 is a once-in-a-life opportunity. Chrome just gives you another reason to buy it.
Apple - all I can say is that I have always been a PC user. I used to also work in an academic computing lab some 10 years ago fixing people's computers and always thought the Mac sucked. However, lately, I have had the opportunity to test a Mac first hand and I can tell you - this is the real deal. That Macs will continue to peel away market share from PCs is a given. Apple's stock meanwhile, is down from its all-time high of around $200 a few months back. In fact, it is down some 25%.
I also tested the new 3g iPhone and it is a thing of beauty. I had been a Palm (PALM) Treo user for many years before switching to a Motorola (MOT) Q this year (a decision I very much regret). I have also been and still am a big fan of Blackberry (RIMM) but having finally got my hand on a 3g iPhone. I do believe that once companies figure out how to make it work correctly with Microsoft Exchange server, it will be the phone of choice for corporations.
My estimate is that Apple has already sold over 4 million of these new iPhones in the first two months and here is why Apple will make more from these iPhones than the previous version:
- The new phones have a higher level of security built in which will prevent buyers from unlocking the phones for use with non-authorized carriers. This means more of these phones will be activated by AT&T (T), which shares its monthly revenue earned from iPhone contracts with Apple.
- Open source means a plethora of applications will (and have) hit the market. Best of all, these applications can only be downloaded via iTunes and developers will have to pay Apple for every sale of their product.
Ultimately, the iPhone, the Mac and iTunes are what will drive Apple's earnings going forward. Steve Jobs' health is an overblown issue and I think Apple shareholders will be rewarded for their patience soon.
Disclosure: I own AAPL and RIMM but my position can change
anytime without notice.
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This article has 30 comments:
$ spend on advertising is directly proportional to the population.....
as the population on the internet grows....the $'s spent on internet advertising grow.....and since google has over 50% market share in internet search, i think google is an excellent buy
As the population spends less, companies will have less revenue to start new advertising campaigns. Am I missing something??
From a fundamental point of view, no one is going to be buying iPhones and Macs as the economy tanks. No one will be purchasing advertising, either -- remember what happened to the Internet companies in 2000-2001.
From a technical point of view, the picture is even more bearish:
- AAPL has broken through an almost 6 year uptrend line about 2 weeks ago by more than 3%. That's enough for me to say watch out below. In addition, also about 2 weeks ago, AAPL broke out of a year-long symmetrical triangle (triangle-top). Last week, AAPL reached a low at $146.00 lower than the previous recent low of $146.53 in the middle of July. It looks like today's market action will easily take out those lows -- premarket currently at $142.08 as I type. Recent high of $180.45 was lower than the last high of $192.24 in April. Lower highs and lower lows mean DOWN TREND. This is not a good time to buy but probably a *PRETTY GOOD* time to sell.
On GOOG - it clearly broke out (down) out of a year-long triangle top a week or so ago hitting $406.38. This low has not been hit since October, 2006. GOOG is trading around a multi-year low. Not a good time to buy -- falling knife anyone? GOOG also has the same pattern of lower highs and lower lows -- DOWN TREND. I wonder if the author of this article ever picks up a chart book?
IMHO
nyc
I'm astounded that you are unaware of the arrangements of both iPhone deals. Obviously you know very little about AAPL (and ATT as well).
IMHO it's a shame that GOOG and AAPL are getting wrapped up in this mess. I just hope the hype/good news coming out of Apple doesn't slow down before the end of this non-recessionary-perio... ;) Google recovers as soon as this is over.
...I think I just talked myself into buying Google...
You do have a compelling argument there. To be honest - I am *&#in scared. I do believe that technical analysis (TA) really doe show trends of sentiment on a stock. Of course, as more people follow TA, it sort of becomes a self-fulfilling prophesy.
The problem with sticking to TA is that it ignores real-world events. So if Apple -
1- Announces that it sold 8+ M iPhone 3Gs since July, and/or
2- Comes out with really exciting new products in the Laptop/sub-laptop lines
THEN the whole thing will turn on a dime. AND any of these could happen tomorrow.
Finally, if none of these announcements happen beforehand, there is the probability that they will blow away expectations when they announce their FQ4 earnings in October.
TA is good, but in the end financials will trump TA.
The phone market is fickle and fast paced , what is cool and fab one year is not that great the next. NOK should not be counted out, they have the cash the people and the know how required to come out with some great phones. Remember they are the biggest and best todate, and while Steve and the boys do a great job designing and selling products, so do NOK.
As to google I am long, but worried a few years from now Chrome will be seen as the high tide in terms of public sentiment. The model has been great to date, but can it continue and still have the confidence of everyday users.
Also I am not sure corporations really want another MSFT, so I dont not think they will be signing on to googs cloud as fast as one might think.
.
I sure hope the AAPL fanatics buy some more. The idiotic optimism will be great for keeping the stock from recovering anytime soon.
That's all that matters. The people talking about charts have lost their minds.
good luck with your position.
financeninja.wordpress...
TA is good, but in the end financials will trump TA."
Just like when the big oil companies report the largest profits in corporate history (Billions of dollars) and the stock goes down...
Right.
Your not giving enough credit to TA. How do you think the market movers (hedge funds etc.) enter the market? Based off financial's? Your kidding right?
oh, and yes, I know about that incredible performance by one or two hedgefunds which use a quantitative approach. I am just not convinced yet that their performance will last another decade or two.
I'm brazilian and considered investing in the Google IPO. Shares were 90, I didn't get the papers done on time and couldn't grab'em... They skyrocketed since then, and today at 400 I don't think it's a one in a lifetime opportunity..Financial... might be though.
Also, charts are good for hind sight. For example, I can point you to 5 different support levels for both Google and Apple that technicians can use between current levels and a 20% up or down from these levels. Bottom line - charts need to be used in conjuction with market psychology and fundamentals. You were quick to point the decline in Apple the day after I published the article. However, that had nothing to do with Apple. It had everything to do with the 500 point drop that took down every thing. Similarly the bounce back in Apple since is also attributable to the market bounce. How do your charts explain crashing through multiple support levels and breaking through multiple resistance levels all within 2 days? What happened to your trends? Use charts but I also advise the occasional common sense.