Google vs. Apple vs. Facebook -- A Story of Expectations

Shares of Google Inc. (NASDAQ: GOOG) posted an all time high near $750 per share today, while shares of Apple Inc. (NASDAQ: AAPL) have pulled back even further from an all-time high set last week. And Facebook Inc. (NASDAQ: FB), which once won the hearts and minds of investors, continues to struggle.

It wouldn’t be fair to say the Google is a surprise winner because the stock has been generally on the rise for the past 12 months. The company has wrestled away the lead in display advertising from Facebook — which had taken the lead from Yahoo! Inc. (NASDAQ: YHOO). Added to Google’s massive strength in search advertising and its leading position in mobile advertising, the company is a virtual juggernaut. It got a little help from the iPhone 5 too, in the form of a botched iOS map application.

The expectation for Google is to continue to grow its advertising strength. Really, no one else is even close.

Apple sold more than 5 million new iPhones over the weekend and it seems as though investors expected more. The iPhone 5 launch was Apple’s most successful ever, but 5 million was already priced in. To move the needle the company needed to bust that number and it didn’t happen. Expectation (hope) dashed.

One thing to note here is Apple’s continuing patent war against Google proxies like Samsung. Apple may wound Google, but it’s pretty unlikely that the wound will require more than a few stitches. And going thermonuclear really hasn’t done a whole lot for Apple either.

Facebook got a nasty surprise from a Barron’s cover story that valued the company’s shares at $15, a long way from the $38 IPO price and even further from the first day high of $45 a share. Facebook’s big problem — at least as far as investors are concerned — is dilution. Another lockup period ends in October and, as the Barron’s article pointed out, Facebook uses restricted stock to top up employee pay. And as the share price drops, Facebook just issues more stock to employees. From the point of view of a company that wants to hold onto key employees and continue to develop great tech products, that’s not a bad thing. Investors, of course, don’t see it the same way. Expectations call for more of the same at least until next year, which is forever for some investors.

Facebook’s shares had tumbled by 10% earlier today, triggering the Nasdaq circuit breaker that puts a restriction on the price at which short sales can be made. The stock is currently trading at $20.74, down about 9.3% in a post-IPO range of $17.55 to $45.00.

Apple’s shares are down 1.7% at $688.34 in a 52-week range of $354.24 to $705.07.

Google’s shares are currently trading up 1.9% at $747.95 after posting a new all-time high of $748.90 earlier today. The prior 52-week range was $480.60 to $734.92.

Paul Ausick