Category Investments

Stock Pick of the Week with Momentum Securities: 06 May 2021 – Alphabet Inc. and Apple

06 May 2021 Momentum Securities

Momentum’s leading stockbroking division – Momentum Securities – will be bringing you their Stock Pick of the Week each Wednesday or Thursday. The stock pick motivation is available as written content and a downloadable video and audio clip.

This week’s picks: Alphabet Inc. and Apple
About: Alphabet Inc: Alphabet Inc. is an American multinational conglomerate headquartered in Mountain View, California. It was created through a restructuring of Google on October 2, 2015, and became the parent company of Google and several former Google subsidiaries.

Apple: Apple Inc. is an American multinational technology company headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software, and online services

Portfolio Manager for Momentum Securities, Wian van Wyk shares his insight on Alphabet Inc. and Apple

Click here to download the audio and video clip.

“Today, we are comparing two giants in the tech industry and will determine which is the better buy. With both companies share price increasing around 80% in the last year, I feel an overview comparison might be beneficial.

Alphabet's revenue streams can be broken up into two segments, namely Google and Other Bets. Google's focus is on advertisement and cloud computing, with the primary revenue being generated through advertisements within Google search, YouTube and other Google platforms. Whereas Other Bet’s goal is to acquire unprofitable business opportunities that may turn into larger revenue streams at a later date.

Other Bets’ most recent possible revenue success is generated by Waymo. This is an autonomous driving company. Waymo started to offer fully driverless rides since last year October. An analyst at UBS believes that Waymo could generate as much as $114 billion per annum by the year 2030. This could be a major game changer for the company.

The second company we're looking at is Apple. Apple’s two major revenue streams are through products and services. Whilst products are typically the company's growth engine, Apple has increased emphasis on services business. This includes subscription services like Apple Music and Apple TV. This move makes sense as hardware sales tend to be cyclical, leading to lumpy financial results whereas subscription products and services tend to bring in steady inflows within cash. With over 1.6 billion active Apple devices worldwide, this is another way for the company to monetise on its massive user base.

Apple is also currently working on self-driving electric vehicles. Though this is reported to be five years away from launch and the race is to determine who will manufacture these vehicles are still to be determined. Both these tech companies have built a strong brand and have achieved incredible scale with operations that span globally. Both these companies have also reported strong earnings within the last quarter, with Alphabet's revenue being up 19% annualized since 2017, compared to Apple's revenue being up 11% annualized since 2017.

Unfortunately, Google is currently losing market share in its core advertising business. Although I believe both shares will outperform the market within the next five years in this battle amongst the giants, Apple in my books is my pick for the week by a slight margin.”


Quick Polls


Financial behaviour experts suggest that today’s risk modelling methodologies ignore your client’s emotional ability / behavioural capacity. What are your thoughts on spicing up risk profiling tools to make allowance for your client’s financial behaviours


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[d] The perfect risk profiling tool is science fiction
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