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Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), or Google Inc (GOOG)? Competition Is Heating Up

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Author’s Note: This article is a follow-up to my previous editorial The Contrarian View: Four Reasons to Sell Google (NASDAQ:GOOG) and Buy Apple Inc. (NASDAQ:AAPL).

Anticipation always builds in the marketplace ahead of earnings season, especially with popular tech stocks such as Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN) all providing quarterly reports within close distance of one another.

Apple Inc. (NASDAQ:AAPL)

These market giants have revolutionized our daily lives, and it’s even more fascinating to realize most of this change has occurred within the last two decades. Apple Inc. (NASDAQ:AAPL) revolutionized the smartphone industry with the iPhone introduction in 2007. Larry Page and Sergey Brin co-founded Google Inc (NASDAQ:GOOG) in January 1996 as a research project at Stanford University. Jeff Bezos had a dream to start an online bookstore in 1995, naming his company Amazon.com, Inc. (NASDAQ:AMZN) after the world’s second longest river.

Fast-forward to present date, and Apple Inc. (NASDAQ:AAPL), Amazon, and Google are fiercely competing to become the most powerful name in technology. The concrete borders that once separated one company from another have been knocked down, and the areas of distinction are becoming more fewer as these businesses increasingly overlap. Consumers frequently use the names of all three companies in the same conversation.


Which Silicon Valley powerhouse is a strong buy?

One could make an argument that all three companies–Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN)–are all great long-term buys, and it would be a tough argument to beat. However, the stock market can be inefficient which creates a buying opportunity in one stock and a selling opportunity in another.


Apple: The worst is over

Wall Street loved Apple Inc. (NASDAQ:AAPL) at $700/share, but has since dramatically reversed course on opinion. Most on Wall Street hate the stock now that it’s trading at $400.

Here are four reasons I recommend being a contrarian investor and buying Apple:

On April 23, Apple beat second quarter earnings by posting $10.09 EPS on $43.6 billion in sales. The company sold 37.4 million iPhones and 19.5 million iPads during the quarter, both higher than the year-ago period. In particular, iPad sales rose 65% year-over-year.

CEO Tim Cook stated on the conference call that Apple will release new products during fall 2013 and throughout all of 2014. Industry analysts have criticized Apple based on its irregular product refresh cycle, when competitor Samsung introduced the S4 smartphone less than 12 months after its successful predecessor. Cook responded by stating Apple will continue to innovate and that competitors have “trade offs” with larger screen sizes.

Apple Inc. (NASDAQ:AAPL)’s board of directors more than doubled its capital return program to shareholders, earning the approval of former critics such as Greenlight Capital’s David Einhorn. The company raised its quarterly dividend by 15% to $3.05/share or $12.20 annually, and the share repurchase authorization increased from $10 billion to $60 billion effective immediately.

According to Apple’s financials, the company had a cash balance of $145 billion at quarter end. This is equal to $154 in cash per outstanding share, indicating that investors are paying only $260 per share for Apple’s business. The stock trades at a mere 6x price-to-earnings, excluding cash.

The Apple Inc. (NASDAQ:AAPL) story becomes even more attractive if you believe that today’s sales will grow or maintain over time. A simple discounted cash flow (DCF) spreadsheet will indicate that Apple’s cash per share will continue to expand significantly, in effect decreasing your cost of ownership. I’m optimistic, as the tablet market alone is expected to triple over the next four years.

Google: Momentum is fading

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