Stock valuations have never been about corporations current revenues and profits, but rather about
expected future revenues and profits. A decade ago, fundamentals/financials were more important than they are today. Your approach would have worked better back then. Stock prices today are determined by so many things unrelated to their companies actual performance, that it can make your head spin. Stock valuations are no longer an accurate reflection of a companies competitive position, particularly when the company deals in consumer electronics.
I have no idea why Google's stock went up. Some assume it is due to Androids world wide market share growing faster than iOS's. I find this ridiculous, as Android has done nothing for Google but cost them billions, without providing any viable plan on how to recoup those costs. However, if enough people are willing to ignore that fact, and believe Google is actually gaining something through Android's popularity, then that obviously doesn't matter as demand for the stock will drive its price higher.
This is what I think is driving Apple's current downfall:
- Investors realized that Apple has sucked every last penny of profit out of their supply chain. This is one of Apple's traditional strengths, but they have "maxed out" whatever is to be gained from it.
- Investors realized that Apple has lost the technological lead. They fear Apple's margins will evaporate together with that technological lead. That is particularly bad for Apple, as they currently enjoy margins only drug cartels can compete with (low cost production combined with high sales value).
- Investors fear that Apple will refuse to compete in the low-end/low-price markets, where most of the world's remaining smartphone market share is to be had. Combined with the fear that Apple has somewhat saturated 1st world markets, investors believe Apple has no place left to expand to.
- Investors fear that Apple is loosing its "cool". When all parents have iPhones and iPads, and even Grandparents stand in line for an iPhone, teenagers usually turn to other things. Market research shows this is becoming a problem in 1st world markets.
- Investors fear the commoditization of the smartphone market. Profit margins will plummet should they no longer be viewed as a status symbol. This would hit Apple the hardest.
- Investors fear Apple is playing everything too close to the chest. They fear Apple is making the same mistakes they made in the 1990's which may again lead them to become a niche and boutique developer of luxury consumer electronics, which nobody but Hollywood hipsters are interested in.
- Apple uses smartphone storage as a means of market segmentation (16GB, 32GB and 64 GB models). Storage being the only difference, Apple sells the 64GB version for $100 more, while it actually costs them but $20 more to build. NAND storage chips are commodity parts, but Apple has many consumers believing they represent a major part of a devices cost. Nokia and Samsung are expected to break this widespread perception soon, further eroding Apple's profit margins.
- Apple is experiencing difficulties in China, as the Chinese government isn't willing to subsidize Apple's iPhone to the extent carriers typically do.
- Investors were disappointed by the iPhone 5. All they saw was an iPhone 4 with slightly modernized hardware (completely expected) with an extra row of icons. Investors fear innovation at Apple died with Steve Jobs.
I believe the market has correctly identified the trend, but the price is falling far too quickly. Apple needs only to introduce iOS 7 with a fresh and modernized UI and come to some agreement with Chinese officials and that stock price could flip real fast. It's an overreaction, just as the markets behaviour towards Nokia was half a year ago. Unfortunately, I have no special insights into Apple's iPhone division, so I can only guess as to where Apple is going, otherwise I would also be long or short APPL.
Microsoft is not seen to be competing in the consumer electronics space (apparently XBOX doesn't count and profits from WP are none existent). Microsoft is not hip. It isn't cool. Microsoft just keeps all the things running nobody directly cares about (unless things don't work that is). If you don't work in IT, all you ever see from Microsoft is the start-up screen on your computer/laptop. All that leads to a somewhat suppressed, unspectacularly steady stock price.