Last year, Google decided to split itself into numerous smaller businesses, and then consolidate all of those businesses under a newly-formed conglomerate by the name of Alphabet, which was valued at more than $500 billion on Friday. That means that Alphabet only slightly less valuable than Apple, and considering the company’s rapid growth, it’s very possible that it’ll replace Apple as the world’s most-valuable company in the near future. This is due not only to Google’s dominance over the online advertising market and the sheer diversity of the companies operating under Alphabet, but also the slowing smartphone market that’s expected to negatively impact Apple’s sales.
Alphabet could soon become the most valuable company in the world. The Google powerhouse traded on Friday morning with an equity value above $500 billion, less than 10 percent shy of Apple’s value. Investors value the search firm’s earnings from rapidly growing digital advertising more than twice as highly as Apple’s in a saturating smartphone market. Wall Street, however, may be overlooking Alphabet’s risks. Global smartphone sales growth slowed to 10 percent last year, according to the consulting firm IDC. Reports of cutbacks at Apple suppliers suggest tepid demand for its latest phones. Analysts fear that the company may struggle this year to match the 230 million or so iPhones sold in the last fiscal year to September. An oversupplied market could bring price wars, which could hurt margins — and the iPhone accounts for about 60 percent of Apple’s revenue and a bigger chunk of its profit. As a result, investors expect little growth in the company’s top line this year and are paying only about 10 times estimated 2016 earnings for the stock. The mobile digital advertising market, meanwhile, should almost triple to nearly $200 billion globally by 2019, consultants at eMarketer reckon. Alphabet’s sales are forecast to grow about 15 percent this year. This wind at Alphabet’s back and the possibility that its self-driving cars, robots or medical endeavors will pay off help explain why it commands a price-to-earnings multiple above 20.