As we delve into the details of Apple Inc. (AAPL) and Alphabet Inc. (GOOGL), we observe a trend of apparent fragility, or what investors might consider as “pure weakness”. The two tech giants, renowned for their impact on global markets and technological innovation, seem to be experiencing fluctuating, potentially concerning trends in their stock market performance.
In the trading world, Apple’s name has always been synonymous with robust returns and steady growth. Over its tumultuous history since its incorporation on January 3, 1977, Apple Inc. has established itself as one of the world’s leading tech companies through its consistent innovation and the creation of unique, high-quality products. However, a closer look at recent trading patterns reveals certain elements of volatility that are rightly making investors wary. The company’s stock, trading under the ticker AAPL, has shown strains, with tepid growth and potential downturns evident. Market analysts have attributed this to a variety of factors, ranging from economic uncertainties to shrinking product demand, inflated valuation and rising competition in the global marketplace.
The key warning sign from the investor’s point of view is the dramatic rise in Apple’s debt levels, which have spiked nearly 2.5 times since 2017 to reach $110 billion in March 2021, a trend that appears to defy the company’s traditionally conservative approach to leverage and balance sheet management. Additionally, there’s been a steady decline in iPhone sales, once the company’s crown jewel. The iPhone’s shrinking share in total revenue suggests that Apple’s diversification initiatives aren’t yet enough to vault it beyond the category of a ‘one-product’ company.
Similarly, Alphabet Inc., Google’s parent company, has seen its fair share of troubles. Its global advertising business, which forms a significant part of Alphabet’s revenue, has been hit hard due to the ongoing pandemic, with revenues falling considerably in 2020. The decline in advertiser’s expenditure during the global COVID crisis sharply impacted the company’s revenue generation. This, coupled with increased scrutiny and legal battles over its monopolistic practices, has cast a dark cloud over the company’s usually bright prospects. As such, Alphabet’s share price, traded as GOOGL on the stock market, is attracting similar conclusions of alleged pure weakness.
The company’s growth in terms of traffic acquisition costs (TAC) is another contributing factor, further reinforcing the notion of weakness. The TAC is what Google pays to various affiliates and partners in its network