Google Inc (GOOG) vs. Apple Inc. (AAPL): Technicals vs. Fundamentals

Apple Inc. (NASDAQ:AAPL) versus Google Inc (NASDAQ:GOOG) is a financial face-off that many investors have pondered over the past few years, and there are multiple wrinkles in both sides of the argument. In a “Talking Numbers” segment on CNBC earlier today, JC O’Hara of Phoenix Partners Group and Erin Gibbs of S&P Capital IQ made the discussion a battle of technicals versus fundamentals, which got a bit heated.

Apple Inc. (AAPL), Google Inc (GOOG), YCharts

O’Hara was up first, who harped that Google Inc (NASDAQ:GOOG) was a better buy than Apple at the moment. On the subject, the Phoenix Partners Chief Market Technician with a penchant for technical analysis made the case that the chart wasn’t looking pretty for Apple Inc. (NASDAQ:AAPL). Let’s look at the highlights:

Apple enjoyed a nice, healthy, steady uptrend from the 2009 lows; rallied up to the $700s, and kind of stalled out, pulled back. And what concerns me is where it stopped this pullback. It found a low from May around $530 [...] traders saw that low; they used it as a stop. It bounced slightly from here, but I don’t think that was a really good support zone. [...] I think Google is actually standing on very strong support. We see a multiyear wedge forming. Multiple times it tested that $640-$650 area of resistance [...] now it’s resting right on that support. And as they say, tall houses can be built from strong foundations, and I think Google has a strong foundation right here.

In response, Erin Gibbs wanted to look at the situation from a fundamental perspective as well, and she came to the conclusion – as we have many times before – that Apple Inc. (NASDAQ:AAPL) is a better value play than Google. Although she didn’t mention any near term catalysts that we feel the stock needs to reach a fairer valuation (a China Mobile deal would be first and foremost in our book), Gibbs had some good points, summarized below:

Not only if you look at a chart, but just fundamentally, in May, they [Google] bought Motorola. The company has fundamentally changed [...] Apple is trading at 40% less on valuation; it’s also lower than its peers versus Google, so you can get similar long-term earnings growth – about 14% [...] versus 16% on Google – but you’re trading at a [...] lower valuation when you’re looking at next twelve months’ earnings. [...] Not only that, but Apple pays dividends.

Intriguingly, O’Hara briefly mentioned one theory about how the markets may be viewing Apple’s dividend yield – close to 2% – stating that he believed “traders are jumping into Apple [...] to rent it [...] for a potential special dividend being paid in the last month of the year,” harping on the point that many shareholders might be choosing to “rent” the stock rather than own it. As you can probably guess, this assertion was immediately rebuffed by Gibbs, who closed with the statement that Apple “is a long term quality company,” which we’d have to agree with.

Obviously, there are both sides to every argument, and many investors do consider fundamental and technical analyses when making their investment decisions, but we want to know from you: does O’Hara have a case about Apple Inc. (NASDAQ:AAPL) being a good rental, but not an outright buy at the moment? Similarly, do you see Google Inc (NASDAQ:GOOG) as a better investment than the Cupertino-based company?

It’s probably clear where we stand – more along the lines of Gibbs’s reasoning – but we’d like to hear your opinions. Don’t be afraid to share them in the comments section below.

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