My Developer friends’ are upset about Apple vs Amazon
Many developers i know personally or follow on Twitter have been shaking their head at the stock market. Why are the markets punishing Apple and rewarding Amazon given the huge difference in their total revenues and profits earned? “Apple makes enough cash to buy Amazon outright over and over again!” they tap furiously into iOS or OSX based devices.
You have to remember this is a relative discussion not an absolute discussion. Too many people fall into that absolute trap. “Well, Apple makes WAY more money than Amazon so their stock should increase faster than Amazon’s”
Put simply, the markets are trying to predict the future. And here’s what they’re saying. They believe Amazon has a greater chance of being in the same or stronger position in 12 - 24 months relative to their competitors than they are today. Looking out 12 - 24 months the market believes Apple has a better chance of being in a weaker position relative to their competitors than they are today.
24 months ago perhaps 20% of smartphone buyers would seriously consider buying an Android phone over an iPhone. 24 months ago probably only 10% of buyers would consider buying an Android tablet over an iPad. Today I bet that number is closer to 50% and 25%. You could argue with me on numbers but I doubt you could argue with me that it’s higher than it was 2 years ago. And the market believes this trend is only going to continue for the next two years.
I don’t believe there’s been any type of similar fundamental shift with Amazon. That is, that a meaningfully larger % of people would say today vs 24 months ago “You know, I’m going to also seriously consider this Amazon alternative as I research and order online” You might make a good argument that - via things like Prime - Amazon is in an even stronger position than they were 24 months ago.
That’s what the markets believe. That’s why more people are willing to sell Apple’s stock than they are to buy it right now and viceaversa for Amazon.
Having a cash cow business at best puts a floor below how far your stock will fall (*cough cough Microsoft*?) It won’t drive your valuation upward. At this stage it’s unlikely there’s anything Apple can do relative to Phones or Tablets to return strong growth to their stock price. To do that, they’ll need another hit. TV and cable are still screaming to be brought into the Internet era and self driving cars will turn drivers into content consumers for an hour each day. So the opportunities exist and Apple has the cash reserves, brand and troops to grab them. It’s just whether they have the visionary leader to make and execute the right bets.
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