Apple (AAPL) churns out products that are revered by customers with cult-like obsession while Google (GOOG) dominates the world of Internet search and advertising, but only one of the Silicon Valley tech giants is feeling any love these days from Wall Street.
Roger L. Kay, the founder and president of Endpoint Technologies Associates, Inc. has a simple theory to explain why investors are hot for Google
stock and cool on Apple these days.
"We like to play king of the hill and once you get to be king, we like to push you off," Kay said. "At one point, Apple could do no wrong. Now it can do nothing right."
Shares of Google started trading at $831.69 Monday morning -- up 49 percent from June, and a 69 percent increase from October 2011 when the stock was selling at $495.52.
Apple shares, by contrast, opened Monday morning at $430.47, down 25 percent from June, but up 15 percent from October 2011 when shares were going for $374.60.
While many analysts say it's unfair to compare the two companies because of their different products, missions and cultures, they still have plenty of explanations for investor reactions
to Mountain View-based Google versus Cupertino-based Apple.
In addition to its search engine that continues to dominate Internet ad sales, Google also has had phenomenal success with its Android software, which has made the company a huge force in mobile computing. And even though Apple can't produce enough of its new iPad Minis to meet demand, investors have yawned at Apple's overall suite of recent products and are waiting to see if it will unveil a less-expensive iPhone and a 5-inch "phablet" this year in response to cheaper competitors.
"Google dominates the search industry and has no serious competitor," said Tim Bajarin, president of Creative Strategies. "Apple now has more competition and that means they have to drive that much harder to innovate faster. The street's only going to love them again if Apple continues to have significant products that drive huge demand in the Apple ecosystem."
Part of Apple's troubles with investors began in September when it unveiled a flawed Maps App feature in the iPhone 5 that misplaced famous landmarks and sent users on dead-ended goose chases. The failure of Apple's Maps App led to the firings of two high profile managers and caused Apple CEO Tim Cook to issue a mea culpa while promising that the mapping software would improve as more customers used it and more data was gathered.
The embarrassment not only exposed Apple to ridicule -- Cook told users to turn to competitors' apps, including Google's, until the Apple's map app improved -- but also offered a glimpse of its vulnerabilities.
"The maps debacle showed investors how valuable Google's technology was -- how hard it was to replicate -- and how Apple may struggle as the world moves beyond iTunes toward cloud-based services," analysts with Barclays Capital Inc. wrote to investors last week after meeting with Apple executives.
Cook seemed to scratch his head over Apple's disappointing stock performance last month at Apple's annual shareholder meeting -- even as he ticked off a long list of accomplishments for his company that included the launch of its popular iPad Mini in October and revenue growth of $48 billion that was more than Google, Microsoft Dell, Amazon, HP, Lenovo, RIM and Nokia -- combined.
Cook told shareholders that he and Apple's board of directors share their "disappointment" in Apple's stock price.
"I don't like it either," Cook said. "The board and management team don't like it."
Apple continues to follow a formula of trying to build the best phones, tablets and laptops on the planet but its recent products "have been a little bit under-whelming," said Ken Dulaney, vice president and mobile analyst for Gartner.
At the same time, Google remains a darling of Wall Street despite a philosophy of what Dulaney calls "chaos management."
"Some of what they do fails and some of it succeeds," he said. "But that's what they want. Google is like a giant university where if an idea fails it's no big deal. Just go onto the next thing."
After meeting with Apple executives last week, Barclays analysts lowered their second quarter earnings per share estimates from $10.01 to $9.80 -- and dropped their third quarter earnings per share estimates from $9.84 to $9.04.
Barclays now believes that Apple shares should sell for $530, down from a previous target of $575.
In a report to investors, Barclays said that "we sensed that the (Apple) team still has a sense of urgency and is not happy with the current stock price. ... We will be watching carefully whether the company can successfully develop new services that re-energize customers and the investor base."
Kay believes that Apple shares should be trading higher and thinks that Apple's actual stock performance is the result of an "emotional response" from investors.
"Some of it is real and some of it is just perception," Kay said. "And some of it is just the sense that the king of the hill has been there long enough."
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