Google Might Have Guaranteed The End Of The iPhone

| October 12, 2016 | 0 Comments

iPhone 7Apple’s 10 years of smartphone dominance might have just come to an end. Google’s largest product launch in company history unveiled multiple products that target the biggest money-maker for the Cupertino tech behemoth. See why it might be time to start selling your Apple stock.

Google (NASDAQ: GOOG) has taken the battle for tech dominance to the next level, throwing down the gauntlet on Apple (NASDAQ: AAPL) and Samsung.

GoogleThe tech giant may have launched the true iPhone killer — its new smartphone, the “Pixel.” It’s also ending its Google Nexus brand to focus on this new hardware.

Google already has a stronghold on the smartphone software ecosystem with its Android operating system. Android owns over 85% of the smartphone market share. Now it’s looking to own the entire tech market.

It’s a bold move that could be just what Google needs, coming straight for Apple, as the pricing of the Pixel is in line with the iPhone.

But it goes beyond just this new phone. Google had its biggest hardware event ever last week, which also revealed plans for the “Home,” new home virtual assistant (think: Amazon (NASDAQ: AMZN) Echo competitor), and a new virtual reality device called the “Daydream.”

How Google wins the Apple battle

AppleRight now, Apple’s core business is hardware. Notably, the iPhone, which generates over half its sales. Then there’s computers and iPads. However, Google makes its money from the online advertising market. A market it owns, with 90% of the online search market share.

This gives the company a steady cash stream to fund its big bets. Bets that are now aimed at toppling Apple. Up until now, Google has been able to build a great software, but the hardware has been out of its hands, and it relied on third-party smartphone makers.

Google is also adding artificial intelligence, which will take aim at Apple’s Siri. Also, its camera will be on par, if not better, than the iPhone’s. Storage will be comparable, but Google is also offering a compatible VR headset priced at just $79. Apple hasn’t managed to break into the VR market yet.

The move also looks to fill one of the big holes that Google has in its business — mobile. Right now, mobile ads just aren’t as lucrative as desktop ads, which has been a thorn in Google’s side. However, the new smartphone rollout could be the trick to getting more mobile users, which would boost the development of Android apps and drive growth in its ad business.

The broader vision is to make more of a closed ecosystem, which has made Apple so popular for so many years. This includes integrating the multiple hardware gadgets Google offers, from its smart speakers, routers, to Chromecast, and allowing them to communicate with each other.

Apple has kept its hands in consumers’ pockets by offering superior products and an integrated system that includes its operating system. Google is using the money it makes from ads to build its own platform of superior hardware products to go along with its online and software stronghold — hoping to get its hands deeper in consumers’ pockets. But can Google get its hands in investors’ pockets as well — persuading them to trade in Apple for Google?

Can Google become the “new” Apple in investor portfolios?

To start, Apple doesn’t look to be the growth story it once was. It’s now turned to dividends to keep investors interested — offering a 2% dividend yield. While Apple has been taking on debt to fund dividends and buybacks, Google has kept its balance sheet intact, still having virtually no debt. Google, instead of paying a dividend, is focused on investing in growth opportunities like driverless cars.

Still, Apple makes a lot of money, generating over $200 billion in revenues. However, the worrisome aspect for investors is that the majority of that comes from phone, tablet, and computer sales. A market that is fairly easily disrupted.

Google can easily take a big bite out of Apple’s hardware market share, which will ultimately make Google a rather diversified tech company. Who needs the S&P Technology SPDR (NYSE: XLK) when you can just invest in Google and get exposure to the smartphone, tablet, computer, anything online, home devices, driverless cars and more? Lest we forget that Google has outperformed the S&P Technology SPDR by 100% over the last five years.

The battle between these two tech giants will go on for many years and while both will ultimately survive, the increased competition will cut into the profitability of one of these companies. That’s why I like and invest in companies who dominate their niche and have wide moats to protect them from competition.

And, I’m seeing some of the best investing opportunities in the market right now in biotech stocks both large and small. The sector has seen a resurgence over the last three months and there has not been as good of a time to start investing in this sector than right now.

I dedicate the majority of my time and research to finding biotech stocks with upcoming catalysts for explosive growth. It is a key component of my comprehensive strategy for massive profits in my newsletter, Biotech Gems.

Click here to find out more.


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About the Author ()

Bret Jensen is the lead equities analyst with Investors Alley. He's the editor of our newsletters including The Growth Stock Advisor and Biotech Gems. Previously Bret was Co-Founder and Chief Investment Strategist for Simplified Assessment Management, a fund in the top 5% for total returns its inaugural year, and a technology manager in the financial services industry. Bret also actively manages Bret Jensen Invests, a financial news and investment generation website with an investment style using small bets across a myriad of promising but speculative stocks to mitigate risk in these highly volatile sectors of the market.