Is Google’s share price about to crash?

Could be about to follow Apple.

Following the poor performance of Apple shares over the past 8 months, many investors are starting to wonder if Google shares are about to follow a similar fate.

Apple’s share price has dropped from over US$700 in September 2012 to US$440 in May 2013. Over the same period, Google’s share price has increased from less than US$700 to over US$900.

What lies Beneath

Apple shares now trade a relatively low multiple for a tech company. The company currently has a trailing PE ratio of 10.5x and a forward PE ratio of 9.9x (for year-end 2014). This shows that the market expects little further growth from the company after 2014.

On the other hand, Google is valued highly. It trades at 27x earning on a trailing basis and 17x on a forward basis.

The Steve Jobs factor

There is no doubt that Steve Jobs was a revolutionary thinker. His multiple successes at Apple and Pixar are testament to that.

When he died, many felt that Apple would struggle immediately. However, these fears were quelled as Apple’s share price rose strongly. When Jobs died in October 2011, Apple share price was at US$400. Then, following a few months of static growth, the share price rose steadily to reach its peak of US$705 in September 2012.

The share price then declined heavily, dipping to as low as US$390 in April 2013, before recovering to US$440 in May 2013.

Why has this happened?

There are a number of possible reasons for this decline, including:

  • Apple’s upcoming products lack the enthusiasm they had under Jobs and although their previous products remain market leaders, they now face strong competition from the likes of Samsung, Google and Amazon.
  • Now that a couple of years have passed many of the best ideas that Jobs put in place – the ipod, the iphone, the ipad - have been used up and any new products going forward will have to be ones that he was not involved with. While there is no disputing that Apple still has a great design team led by Jonathan Ive, they perhaps lack the final decision over which new product to go with. Steve Jobs was notoriously difficult to argue with and that was surely one of his greatest strengths in pushing through products he liked.
  • With Jobs gone, Apple’s rivals sense blood. They know that Apple’s x-factor is gone and have therefore been more keen to innovate themselves. In short, the fear that Apple will always be two steps ahead is gone.

In closing, Apple’s core consumers loved Steve Jobs. They went wild when he gave his speeches in his turtle neck at product unveilings. They lined up to meet him. They slept on the streets outside Apple stores to be the first to get their hands on his latest gadgets. They miss him… and the market has finally started to realise it.

Google, on the other hand, is a different story.

Photograph: Getty Images

Andrew Amoils is a writer for WealthInsight

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Labour must unite idealists and nativists to beat Ukip

The party has no coherent economic policy, says Labour donor John Mills. 

The heart of the dilemma faced by Labour is that, by and large, its working-class supporters think that you should look after your own first and everyone else afterwards, while its more idealistic middle-class supporters don’t share these nativist views. Add to this the fact that the Labour party nowadays is more middle class, more internationalist, more public sector-orientated, more metropolitan, more intellectual and less interested in winning elections than it has ever been before, and you can see why Ukip is a huge potential threat.

Ukip started by attracting mainly disaffected Conservative voters who thought their party was weak on the EU and who didn’t like David Cameron’s liberal approach to social issues. More recently, especially during the EU referendum, Ukip picked up a huge amount of Labour support. Of the 9.3m people who voted Labour in the 2015 general election, close to 3.5m of them voted for Leave – and half of these people say they are not going to vote Labour in future. Where are they going to go?

The crucial issue is whether Ukip, having gone through all its recent traumas, will get its act together to scoop up these footloose voters. Up to now, the glue which has held Ukip together has been hostility to the EU and distrust of the political establishment. It has lacked coherent policy. This leaves Ukip still essentially a protest operation rather than as a potentially governing party. But this could change. 

With Labour now increasingly idealistic rather than nativist, Ukip may pull together a string of policies that promise support for working-class solidarity, immigration restrictions, social conservatism and a reindustrialisation plan – very much the platform which won Donald Trump the US presidency. Such a manifesto could attract sufficiently widespread working-class support to make large numbers of Labour seats vulnerable. Ukip came second in 120 constituencies during the 2015 general election. There doesn’t have to be a very large swing for Ukip to start picking up enough seats to make the prospect of a future Labour government more and more remote.

Faced with this prospect, what can Labour do? Three key strategies suggest themselves. One is to avoid alienating potential Labour supporters by trying to persuade them that they should have voted Remain. On the contrary, the party must clearly accept the referendum result, and fight hard and constructively towards getting the best possible Brexit deal. 

Second, Ukip is weak on economic policy. It is all very well to promise reindustrialisation and better jobs, but how is Ukip going to fulfil them? Populism shades very easily into protectionism. There is a principled case for open markets to produce more prosperity - but this may only be possible if there are also changes to monetary and exchange rate policy to avoid unmanageable commercial competition. Ukip may, like the Labour party, find this a hard case to make.

Third, Labour needs to change its tone. There needs to be less talk of abstract universal values and more of concrete steps to improve people’s lives. Labour must celebrate working-class attitudes to self-help, trade unionism, mutual support, patriotism and solidarity. The party must build on the huge influx of members, not least because they are the cadres for the future, but it also must avoid alienating old supporters with many years of experience and commitment. It is up to the party leadership to create such a change.

As it stands, too many Labour people are still trying to derail Brexit. The party has no coherent economic policy and it still looks too London-centric, divorced from its working-class roots. Not a good place to be if Ukip pulls itself together. 

John Mills is a businessman and a Labour donor. He founded the group Labour Leave ahead of the EU referendum and has recently published the pamphlet "Why Trump Won"