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Google (GOOG) is More Valuable than Apple (AAPL)?

February 14, 2014 7:22 AM EST
Why doesn't Apple (Nasdaq: AAPL) want to put more of its cash toward buybacks?

Maybe it's just pure machismo?

Observed by one SeekingAlpha blogger, Google's (Nasdaq: GOOG) market cap is around $400 billion while Apple's is about $480 billion. Google, however, only has about $58 billion in net cash, while Apple is at about $141 billion. That implies an enterprise value of around $342 billion for Google and $339 billion for Apple.

Cash flow is a different story altogether: while Google trades at 30.3 times enterprise vale-to-free cash flow (EV/FCF), Apple is at just 7.7 times, indicated that more growth expectations are being baked into Google as it's seen as having a safer business model versus secular headwinds that Apple faces.

The author notes that, while the valuation gap is rather large, Google might be getting ahead of itself and what's to stop Apple from simply entering whatever arena Google is in and dominating it? With $140 billion in cash, only regulators would prevent Apple from truly dominating an industry. His recommendation is to short Google, buy Apple as valuation on Google comes back down to earth.

We couldn't agree more.

Shares of Apple and Google are both positive in early trading Friday.


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