Apple did it again. Record revenue and profits for the holiday quarter just as the company’s stock price slumped to about 25-percent off AAPL’s all time high. What’s going on? I have two theories to explain why AAPL is doing poorly while doing so well, and why GOOGL is doing so well by doing exactly what stock market pundits say is wrong with Apple.
First, the market is rigged.
Can there be another explanation? The world’s richest 62 people own more wealth than half the world’s population. That means a few people own more wealth than God, and half the people in the world are dirt poor, so much so, that collectively they cannot muster up enough wealth to match the top 100 richest people on earth.
It’s the golden rule. Them with the gold get to rule. The rich influence lawmakers to create laws which help them to become even more rich. That’s why the rich pay a much smaller percentage of their earnings than you or I. The rich have enough resources to influence the stock market and do so to buy low and sell high, while you and I are told to buy and sit on a stock.
Second, the market runs on emotion.
How else does one explain Apple’s treatment in the market? AAPL is down 25-percent– despite quarter after quarter of record revenue and profits, and a product line that is diversified and profitable in every segment. Why is AAPL down? Because the iPhone represents more than 60-percent of the company’s business and growth must slow, peak, and the drop because, you know, numbers.
Meanwhile, GOOGL, the ticker symbol of Google’s new parent company, Alphabet, is approaching record levels and could topple AAPL as the richest tech company on planet earth. Yet, those same market prognosticators overlook the fact that GOOGL, while wildly profitable, yes, gets over 90-percent of its revenue and profits the old fashioned way. Search engine advertising. Alphabet is playing with a single letter. There’s no product line that makes money other than advertising.
For some reason, investors and analysts alike think Google’s dependence upon advertising for profits will change over time as the company attempts to diversify (and lets hope it has more success than Microsoft which still depends upon Windows and Office in an age when PC sales and Office usage are going down) itself. Oh, and forget the fact that Google’s diversification efforts have been roughly equal to those of Microsoft.
That Apple profits from the iPhone is a no brainer. But everything else Apple ventures into becomes wildly profitable and almost overnight. Mac, iTunes, iPod, iTunes Music Store, iPad, Watch, App Stores. They’re all big money makers. It’s just that iPhone is the largest business segment in revenue, profits, and market mindshare.
Do you hear or read of market prognosticators becoming fearful that Microsoft has yet to diversify business segments into profits? Do you read of fear that Google has yet to make money beyond advertising?
Finally, let me combine my two positions, two perspectives on the disparity between AAPL and GOOGL, into one. Rigged emotion. Someone or some collective hovering over the stock market is picking winners and losers. Right now, GOOGL is a winner, and AAPL is not, but mark my words, AAPL is a bargain, and those with money are probably buying (for every stock sold there’s also a buyer) knowing that sentiment shifts quickly in the 21st century and it’s always a good way to make the rich even richer.