Zacks Investment Ideas Highlights: Alphabet and Apple

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Chicago, IL – May 13, 2022 – Zacks Investment Ideas feature today highlights Alphabet GOOGL and Apple AAPL.

Alphabet bets big on wearables

Whether the market is up or down, you can bet on one thing: companies are constantly innovating and developing new products to drive future growth. It’s no surprise, but it’s a vital aspect of a business that keeps it competitive and retains investor interest.

Although the tech rout of 2022 has left investors significantly exhausted, there are still positives from these companies to look forward to that can help stocks find new life. Yesterday, the big player Alphabet hosted its annual developer conference; the event is called Google I/O.

The event is held annually and gives consumers and investors a behind-the-scenes look at the cutting-edge technologies that Google has been working on. This is an exciting event for investors who want to stay informed and ensure the company has been busy pushing the boundaries behind the scenes.

Two of the main products the company unveiled were Pixel Buds Pro and a brand new Pixel Watch. These two developments give off similar strategies and products that we have seen with Apple in his AirPods and the Apple Watch.

Pixel Watch and Pixel Buds Pro

Before we pulled the curtain back on the Pixel Watch, there were plenty of rumors swirling around that Google would finally introduce the product – and it turned out to be true. It feels like a direct comparison and an attempt to stay competitive in the smartwatch space that Apple has recently taken by storm.

The watch looks very stylish with its curved glass nature. Releasing in the fall, the smartwatch will be integrated with Fitbit and will also have the ability to use Google Wallet. Additionally, the watch will run on GOOGL’s Wear OS smartwatch feature. Sadly, no price tag has been revealed, although the company has said it considers it a premium product.

The watch displays the company’s first dive into the smartwatch arena. Apple has dominated this space with its smartwatch, and the company has undoubtedly seen major success with AAPL.

In AAPL’s latest quarterly report, the company reported that quarterly revenue from its portable business segment raked in $8.8 billion, a healthy 12% increase from the year-ago quarter. Additionally, Apple Watch revenue jumped 70% from $29.8 billion in 2019 to $40.8 billion in 2021. Clearly, the smartwatch arena is a lucrative arena in which GOOGL tries to exploit.

Alphabet already has its Pixel Buds in the market, and yesterday they unveiled an upgraded version of the product – the Pixel Buds Pro with a special focus on active noise cancellation. The new headphones are equipped with sensors that measure ear canal pressure, using a technology called SilentSeal. They are designed to provide a tight seal that allows comfort and no interruption from the outside world. Additionally, the headphones are priced at $199 and are up for pre-order on July 21.st.

A clear upgrade from the previous model, the headphones are expected to rival Apple’s revolutionary AirPods. The AirPods were a revelation for Apple, and we see people wearing them everywhere. With the AAPL version of the product becoming such a hit, it bodes well that GOOGL is pushing the boundaries of its headphones even further.

Share performance and quarterly results

It’s no secret that 2022 has been a tough one for this tech giant’s stocks. Soaring inflation, soaring energy prices and a hawkish Fed interest rate hike have had a negative impact on the stock’s performance since the start of the year. The cumulative chart below illustrates exactly that.

In fact, the past year has been tough in general for GOOGL stocks. Stocks are hanging by a thread in the positive, giving investors a slight gain of 2%. However, GOOGL stocks showed a higher defensive mix than the S&P 500 over the same period, which bodes well.

In the past four quarters, the tech giant has smashed EPS estimates by double digits three times. Although, in its most recent quarter, the tech giant missed earnings expectations by 4.2%, snapping a streak of seven straight earnings beats. Earnings are expected to rise 0.4% for the current year.

Quarterly earnings in the latest report were slightly below expectations, missing the consensus estimate by a slight 0.2%. This shocked the investor world as GOOGL has not missed revenue expectations since the start of 2020. Additionally, current year revenue is expected to grow 16% year-on-year. another, from $212 billion to $246 billion.

Final Thoughts

Although GOOGL investors have been going through a tough time throughout 2022, investors can expect a lot of things that can breathe new life into stocks. Products that will compete with AAPL in the wearable device space are a big plus; Apple has massively profited from this area over the past few years, driving revenue growth. Google will undoubtedly benefit from taking the arena head-on.

An upcoming stock split and recent stock buybacks are two more reasons why investors may remain confident in the company. These strategies are very shareholder-friendly measures that will soon bear fruit for GOOGL. Moreover, the technological rout cannot last forever. The future looks bright for the company.

Alphabet is a Zacks Rank #3 (Hold) with an overall VGM score of B.

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Past performance is not indicative of future results. The potential for loss is inherent in any investment. This document is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management of securities. These returns come from hypothetical portfolios composed of stocks with Zacks Rank = 1 that have been rebalanced monthly without transaction fees. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. To visit https://www.zacks.com/performancefor more information on the performance figures displayed in this press release.

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