Google (aka Alphabet) to take over Apple as the most valuable company in the world

Google aka Alphabet could very soon triumph over Apple as the most valuable company in the galaxy

The year 2015 was an eventful year for Google, which saw the search giant change its logo, divide its business into startups like Calico, Fiber, Sidewalk, X, and merged all those companies into one brand named Alphabet. Now, Alphabet could very soon become the most valuable company in the world overtaking Apple.

The newly formed group of companies that make Google now are doing relatively very well. On Friday morning, the Google powerhouse traded with an equity value above $500 million, which is less than 10 percent of its Silicon Valley rival Apple’s value. However, things are not looking good on Apple’s front, whose earnings mainly depend on the sales in the ever saturating smartphone market.

According to the consulting firm IDC, global smartphone sales growth slowed to 10 percent last year. News of cuts at Apple suppliers suggest lukewarm demand for its latest phones. Analysts are of the opinion that the company might have a tough task this year to equal to the 230 million or so iPhones sold in the last fiscal year to September.

The margins could suffer due to an oversupplied market of smartphones that could result in price wars, wherein the iPhone holds about 60 percent of Apple’s revenue and a bigger portion of its profit. As a result, investors expect little growth in the company’s top line this year and are paying only about 10 times estimated 2016 earnings for the stock.

In the meantime, Alphabet is still the king of advertising. Consultants at eMarketer estimate that the mobile digital advertising market should almost triple to nearly $200 billion globally by 2019. The sales of Alphabet are expected to see a growth of about 15 percent this year. This wind at Alphabet’s back and a new age of autonomous vehicles, secret robots, and scary-fast internet will pay off help explain why it commands a price-to-earnings multiple above 20.

Alphabet is far more dependent on Internet advertising than Apple is on the iPhone. Ads bring in about 90 percent of the company’s revenue.

A subpar earnings report from Apple next week, or a strong one from Alphabet the week after, could bring a new name to the top of the world’s most valuable companies list.