How Google is now worth more than Apple

Google keeps on marching higher

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This was inevitable. With Apple's (NASDAQ:AAPL) continued share weakness as Google (NASDAQ:GOOG) keeps on marching higher, the search giant was bound to overtake the Mac maker in one important valuation metric: enterprise value.

Enterprise value is calculated as market capitalisation plus debt minus cash. Just looking at market cap, Apple still has Google beat by a long shot with its US$378 billion well ahead of Big G's US$287 billion. It's factoring in the cash positions that turn the tables in favor of the search giant. The Wall Street Journal estimates Apple's enterprise value at US$233.2 billion, with Google just now squeezing ahead at US$240.6 billion.

Apple has historically had no debt, and initially its US$17 billion bond offering had no impact on enterprise value since the company raised an equal amount of cash. However, the market value of Apple's debt has declined since then along with the broader bond market in part due to macro factors like the Fed preparing to reduce its bond purchasing. Apple's paper has declined in aggregate value by roughly US$760 million since then, hurting its enterprise value.

The impact of these bond market fluctuations still pales in comparison to the daily moves in the value of Apple's equity, though. For instance, Apple shares dropped nearly US$11 on Monday, translating into a market cap loss of US$10.3 billion that day — far more than the US$760 million loss in bond value over the past two months.

Google's long-term debt totals just US$3 billion, so bond market fluctuations aren't as meaningful to its enterprise value.

Apple's gross cash position has also grown significantly faster than Google's. Over the past year, Apple had grown its total cash from US$110.2 billion to US$144.7 billion by the end of March (not including the bond offering that took place after earnings). In comparison, Google's gross cash is largely unchanged, growing modestly from US$49.3 billion to US$50.1 billion over the same time frame.

Apple's ability to generate cash at a remarkable rate is a strength in many ways, but it doesn't help its enterprise value.

The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

A version of this article, written by Evan Niu, originally appeared on fool.com.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »