Barron’s suggested Apple’s business model—with no exposure to advertising—was a better bet for investors, and Apple shares soared for most of 2018 while Facebook stalled.
But everything changed late in the year. And Apple’s latest sales warning suggests conditions are more dire than Wall Street thought.
So between Facebook and Apple, who’s actually had the worse 12 months? There are a few ways to answer that question:
Facebook’s stock plunged in late July, when it announced disappointing second-quarter results that shaved $119 billion from its market value in just one day. And shares have fallen steadily since to $131.74. They’re down 29% over the past 12 months. Apple’s stock was soaring until Oct. 3, when it peaked at $232.07. It’s down 39% since then and 17% over the last 12 months.
Apple has lost more than $445 billion in market value since it topped $1.1 trillion in October. Facebook’s market value, $630 billion in late July, is now $379 billion.
In an ominous letter to investors late Wednesday, Cook said Apple had sales of about $84 billion in its fiscal first quarter that ended December, compared with a FactSet consensus of $91.3 billion, and a range of $89 billion to $93 billion set by Apple in early November.
Facebook shares went into a tailspin after the company announced lackluster third-quarter revenue of $13.7 billion. At the time, Pivotal Research Group’s Brian Wieser told Barron’s that advertising revenue deceleration is “inevitable” as Amazon (AMZN) gains ground in what has been a cooling market. For next year, Wall Street now expects Facebook to generate revenue of $68.6 billion. That’s down from $72.3 billion in June.
Apple is blaming the slowing Chinese economy for its guidance cut, when it should likely be looking in the mirror. For several years, the company has relied heavily on the Phone, which accounts for more than 60% of its total revenue, with just incremental changes to the product. At the same time, the company boosted revenue, and profits, by raising the price of several iPhone models to more than $1,000. Consequently, it has lost significant market share to smartphone rivals Huawei and Xiaomi.
Indeed, in its latest earnings report on Nov. 1, Apple warned of weakening iPhone demand and said it would no longer break out unit shipments—a potential red flag for future sales.
“Apple’s challenge is very simple: It needs to drive more iPhones at an acceptable profit level, raise prices on the same or less iPhone units, or grow new product or service categories that more than fills the lack of iPhone profit growth dollars,” Patrick Moorhead, principal analyst at Moor Insights & Strategy, told Barron’s in a phone interview. “I am not concerned for the company,” Moorhead said, but he thinks the stock will struggle until the company turns around the iPhone or develops another high-margin business.
Facebook, for all its problems, has been more proactive about diversifying its revenue. Zuckerberg & Co. have plowed billions of dollars into acquisitions of popular services like Instagram, WhatsApp, and Oculus to expand the company’s user base to more than two billion members.
Now Instagram is driving much of Facebook’s growth. For 2019, Facebook’s revenue is still forecast to grow 24%. Apple’s 2019 revenue is expected to slip 1%.
Source : https://www.barrons.com/articles/apple-vs-facebook-whos-had-the-worse-run-51546599600