The Stunning Reality of Apple, Amazon, and Facebook in 3 Charts
MEGA TECH DIFERENCES
We have quickly come to a place where there are five mega tech companies that are ruling the world: Facebook Inc. (NASDAQ:FB), Alphabet Inc. (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL) and Amazon.com Inc. (NASDAQ:AMZN).
Each of these companies is stepping on each others' turf, each competing directly, indirectly and everything in between. The business lines have become so overlapped, the audiences they are pursuing are so oversaturated that we start to lose sight of the fact that these five mega tech companies are quite different in their operations and approach. Let's look at a few charts that are fascinating and draw out the vast differences between these firms.
MEGA TECH STOCK RETURNS
We'll start simple -- here are the five mega tech stocks ranked by stock return over the last year.
Amazon.com Inc. (NASDAQ:AMZN) has blown past the market and its mega tech peers with a 68% return in the last year. Facebook Inc. (NASDAQ:FB) has also loudly beat earnings expectations and seen its stock jump nearly 50%. But rather quietly, Alphabet Inc. (NASDAQ:GOOGL) has become the largest company in the world with a 34% rise in stock price over the last year. Interestingly, the bottom two performers are the oldest companies: Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT).
Now let's look at the charts that show how differently these firms operate.
MEGA TECH R&D
Next we will rank these five companies by the amount they spend on research and development per $1 of operating expense.
Two points are astonishing, here. First, Facebook Inc. spends almost $0.40 of every dollar in operating expense on R&D. Now, we need to be aware that stock based compensation finds its way into the R&D line on the income statement, which is odd, but is reality.
While Facebook, Inc. spends a ton here, it also has the smallest operating expense in general, so the comparison isn’t really apples to apples. But Alphabet Inc. is enormous, and the firm pays $0.17 in research and development for every $1 in operating expense -- that's huge.
We can see that Amazon.com Inc. actually spends the least per dollar of operating expense, but, Amazon.com spends the most on R&D than any other company in the world. Apple Inc.is actually the outlier here, spending much less than Alphabet Inc., Amazon.com Inc. and Microsoft Corporation on R&D.
MEGA TECH STOCK BASED COMPENSATION
Finally, we can rank the companies on the amount the payout in stock based compensation for every dollar of operating expense.
We can see again that Facebook Inc. spends the most on stock based compensation relative4 to operating expense than any of the other mega tech peers and that is in part driving the R&D expense. Yet again, we see that Alphabet Inc. spends a huge amount for a company as large as it is. Apple Inc. (NASDAQ:AAPL) and Amazon.com Inc. are outliers again.
WHY THIS MATTERS
R&D and expense recognition trends alone can never capture the force that truly drives growth for a company. The kind of growth that creates companies like Apple, and Facebook, comes from fundamental changes in technology and the economy. At Capital Market Labs, we identify these transformations, and the companies that will benefit most from them to find the "next Apple" or the "next Google." Our research sits side-by-side with Goldman Sachs, Morgan Stanley and the rest on professional terminals, but we are the anti-institution. Our purpose is to break the information monopoly held by the top .1%.
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