The market seems undecided on the question as both companies are currently worth more or less the same thing. As of writing this, Microsoft is valued at $248,06B while Google trades at $247.81B. Even though both companies are competing with each other in almost all of their segments, they are incredibly different and both have different strengths and weaknesses. Today, I wanted to take a stand as I’ve been a believer in both of the names in recent months. They both have very different strengths and weaknesses and I guess you could argue either way depending on what type of investor you are.
Feel free to answer this before or after reading this post but I’d love to hear, which would you buy?
I have to say that with both companies announcing earnings today, my opinion might change a bit depending on what comes out in a few hours:)
A few Numbers
I’m big on numbers and love to see charts so here are a few:
Ticker Name Price EPS PE Ratio PE Next Year Return YTD Sales Growth Analyst rating Book Value Beta
GOOG Google Inc 755.49 30.17 22.19 15.15 16.97 29.28 4.61 199.21 0.96
MSFT Microsoft Corp 29.59 2.02 10.8 8.97 16.26 5.4 4.33 7.92 0.91
And let’s look at revenues as well as net income:
Revenues (quarterly, in $B)
Net Quarterly Income
So from a numbers perspective only, the fact is that Microsoft makes a lot more money and that Google will need to keep up the growth for a significant amount of time in order to catch up. In terms of income though, if you exclude the last quarter (you really should), Google’s margins are clearly lower. There are many other factors to consider though:
-Has the leading mobile operating system, Android which most Apple competitors are now using
-The undisputed leader in search, the entry point online
-Struggling to compete with Facebook (FB) in social despite launching going “all-in” with the launch of a solid alternative product; Google+
-Has been working on many potential high profile such as robot car driving, clean energy, which could end up bringing revenues & profits in the long term
-Has been able to develop several other leading products such as the top browser, Chrome
-Is slowly becoming a major competitor to Microsoft’s Office thanks to its Google Docs suite
-Continues to take risks and experiment as is currently shows by its attempt at providing high speed internet in Kansas City through Google Fiber.
-Highly concentrated revenues and profits from 2 sets of software (Windows OS and Office)
-Faces increasing competition as the market evolves into cloud-based software
-Has emerged as a market leader in gaming through the xBox which is also an entry into the living room of most families
-Has announced what seems like a very promising table device, the “Surface” which does arrive a couple of years too late as Apple’s iPad and Amazon’s Kindle have captured the market
-Does pay a steady cash dividend that is set to increase steadily over the years
-Has a struggling online division despite investing billions of dollars every year to compete in search
The Bottom Line
In my opinion, both stocks are very good values and which one you choose depends largely on the trading perspective or what your objectives are. Obviously, dividend investors would go for Microsoft and I do think that someone nearing retirement and looking for a growing, stable and safe pick can’t go wrong with Microsoft. Someone that is investing with a 20 year horizon or willing to take more risk would probably side with Google as the upside remains significant. I would personally probably go for Microsoft in my retirement accounts and Google in my speculative accounts. If I really had to make one pick, I’d probably go for Google at this point, the upside seems significant compared to the risk.
What are your thoughts on Google and Microsoft’s stocks? Which one would you go for?