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Apple (NASDAQ: AAPL) Battles Exxon (NYSE: XOM)

Brian Hicks

Written By Brian Hicks

Posted August 5, 2013

So you may have heard about Apple’s (NASDAQ: AAPL) market gains after its third quarter report was released.

But what you may not have heard is that Apple exceeded Exxon Mobil (NYSE: XOM) in market capitalization!

It may seem like comparing the two heavyweight companies is similar to comparing apples and oranges, but hear me out for a second, because this is important to you as an investor.

apple moneyBoth companies are considered the pinnacle of their respective fields and a sign of where tech and energy trends are going.

Exxon Mobil stock dropped 1.8 percentage points to $409 billion after disappointing showings in its second quarter report.

Apple, on the other hand, went from a share value of $405 to $450 in recognition of new and diverse products coming out, including the iPhone 5S, the cheaper-priced iPhone 5C, a new version iPad mini, and the iWatch.

Market cap for Apple is $414 billion, making it the world’s largest company in market capitalization.

It makes for a good comeback for the tech giant, given its 5.5 percent dip in the month of April, allowing Exxon to take over as the most valuable stock.

For Apple, it is still a $100 decline from early 2013 and a far stretch from the share value of $700 the company achieved last year. But it is a comeback nonetheless.

Its diverse array of new products are keeping investors interested and customers engaged for the long-term.

On Exxon Mobil’s end, the company reported its lowest quarterly profit in over three years.

Net income in the second quarter fell 57 percent on the market. Exxon earned $6.86 billion, a decline from $15.9 billion in the previous quarter. Share value increased $1.55, but this missed analysts’ expectations. Total revenue for the company fell to $106 billion, a 16 percent drop from $127 billion.

The decline can be attributed to higher production costs and flat-lining production, particularly in the Middle East and the rest of Asia. Exxon Mobil also had to return profits to Russian oil giant Rosneft (LON: ROSN) in an Arctic exploration campaign. Another factor was falling natural gas demand from Europe.

The company’s refining arena also lagged because of maintenance, and oil prices surged faster than gasoline prices at the wholesale level.

At the moment, there is more excitement and growth in the tech sector than in the energy field. The tech sector has a variety of new gadgets on the market, and Apple is expected to make vast headway with its fingerprint scanning technology.

Apple Momentum in China

I’ve been saying in previous articles that Apple needs a cheaper smartphone to compete against Samsung in the Chinese market.

Samsung (KRX: 005930) has already developed a major presence in China given its good marketing campaign and solid relationships with telecom companies and politicians.

But Apple is China’s second largest smartphone provider next to Samsung and can compete if the 5C is more tailored to Chinese consumer needs.

Apple and Samsung have to contend with lesser known providers that offer quality phones at cheaper rates, but it will at least give Apple a foot in the door when it comes competition in China.

The iPhone 5 in its current incarnation is simply too expensive for many people in China, and the features do not specifically cater to Chinese tastes as Samsung and local smartphones do.

But what Apple really needs is that next-step innovative product that will place the company on the map as a trend-setter in the tech world once again.

It appears Apple is on the right track so far, which is more than we can currently say for Exxon.

Exxon Problems

It is no coincidence that Exxon Mobil and Chesapeake Energy (NYSE: CHK) have been having financial difficulties as of late. These companies are two of the largest natural gas producers in the United States, with Exxon being number one, but natural gas prices have plummeted to such a level that production has been slowing down, especially in regards to higher production costs.

Natural gas prices will continue to be a hindrance, but Exxon only needs to focus on crude production and maintain a steady flow of refining operations in the next quarter.

Energy vs. Tech Stocks

If you’re deciding between energy and tech stocks, there is currently more excitement on the tech side of things.

This isn’t to say energy commodities are dead weight, but a slew of new tech gadgets are awaiting the public and eager investors. The smartphone market shows signs of contraction and innovation decline, but there is still potential in low-budget smartphones in developing economies like China and India. Apple doesn’t have its groundbreaking product yet, but any one of its future products could be a big hit in the future.

There are also plenty of young and upstart tech companies that are hitting the IPO market.

Energy, on the other hand, is prosperous in the area of crude, considering the shale oil boom in North America, but natural gas prices are still too low to keep up production across the board. Couple that with lowering demand from Europe’s struggling economies, and that prevents the energy economy from expanding any further.

But the nature of the market can change, and Exxon Mobil could be on top tomorrow.

For now, Apple’s gaining popularity shows that tech fever has once again hit the market.


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