Facebook (FB) and Alphabet (GOOGL), both are amongst the best technology companies in the world along with Apple, Amazon, Microsoft, etc. The majority of the “Billions” both these tech giants make is from the online digital advertising. While Alphabet is #1 in advertising revenue, Facebook is #2 at around 50 billion dollars every year in ad revenue.
Both these stocks are listed on NASDAQ, Facebook trades with the symbol FB while for Alphabet it is GOOGL Class A and Class C. Class A stock is the parent and the prominent one.
Google is a subsidiary of the parent company Alphabet while Facebook owns Instagram, WhatsApp and Messenger (in house product)
In this article, I will not be going through Facebook and Alphabet – products, services, revenue streams and so on. Instead, the sole purpose of my article is to compare both the stocks with raw available data. No technical charts, futures, forecasting nothing. Just plain comparison with the market and how well these stocks perform over time.
In this article, all I am planning to do is comparing the two stocks and letting you know the results for the money invested. Let’s get started.
Facebook Vs. Alphabet Stock
First of all, when you look at the quarterly or the annual reports (Investor relations section) of both Facebook and Alphabet stock, you can notice a couple of things:
Both these companies make the majority of their income from Digital online ad revenue. (more than 70% of the revenue)
While Facebook is the market leader for social media apps, Alphabet’s Google is the #1 search engine for over a decade and still continues in the space with no competition at all
Mark Zuckerberg is the man behind Facebook, while for Google its Sundar Pichai as the CEO.
Apart from online advertising, there is not much to say about these companies, their revenue streams are not as exciting as maybe that of Apple or Microsoft to be frank.
While for Facebook the important metrics are growing in terms of DAU, revenue per user in the NA territory. For Google, the pixel product line up is on and off, but their ad revenue is a beast.
There you go, that list was not complete, but a few high liners which I could think of.
You all know about Facebook and Google, we use their services all day long so let’s stop it here. The purpose of this article is not that.
Let’s actually get started with the stock comparison and returns 🙂
Facebook Vs. Alphabet: Market Cap and Quick Stats
Before we actually proceed with the stock comparison, let’s look at stock fundamentals:
Facebook is less than Alphabet in terms of Market Capital; Alphabet or GOOGL is way ahead and almost nearing the Trillion dollar market capital which it should by the end of the year.
Facebook stock is better than Alphabet in terms of the P/E Ratio.
Take a look at that Dividend yield, its a bummer 🙂
Both these stocks don’t offer any dividends. They are growth beasts though.
Stock Market Returns
And I’m back to my favourite section.
Today’s participants – Facebook and Alphabet stocks 🙂
Alright then, let the rounds begin.
Knockout 1: YTD Returns (Year To Date Returns)
I know 2020 is a disaster, with COVID-19 and the job losses in millions. But does that affect these mighty blue-chips? Of course, it does in product sales.
We saw a huge drop in share prices especially Facebook and Alphabet, correct? Since then the market has recovered to almost where it was in Feb. But, are we there yet?
Look below for yourself:
Since the start of 2020, with all the COVID-19 pandemic and the market drop, yet Facebook has returned a staggering 9.54% to date and with Alphabet, it’s at 3.78% market returns.
When you compare these returns with Microsoft or Apple’s double-digit returns for YTD stock market returns, this is very low. That’s solely because they are more diversified and product companies compared to Google and Facebook who rely on digital advertising alone for revenue.
Knockout Round 2:
Facebook Vs. Alphabet – 6 Months Return
For the past 6 months, here’s how Facebook and Alphabet’s stock performed:
Facebook (FB): 15.22%
Alphabet (GOOGLE Class A): 4.22%
In the case of Facebook (FB), stock returns for both YTD and 6 months are in double digits and good. Whereas for Google it’s really bad and in lower single-digit returns for both the YTD and 6-month charts.
Knockout Round 3:
Facebook Vs. Alphabet stock – 1 Year Returns
Alphabet clearly dominates the round 3.
Look at the returns on the chart.
Round 3 Results:
Alphabet (GOOGL) stock returns for the past 1 year: 29.16%
Facebook (FB) stock returns for the past 1 year: 20.94%
Let me make it clear, this does not mean the Facebook stock is weaker than Alphabet. Hold on till we get there and see why Facebook wins ultimately! Patience is the key here 🙂
So for round 3, Alphabet dominates and wins! Well done Google 🙂
Knockout Round 4:
Facebook Vs. Alphabet: 5 Year Returns
This is where things start to get a little more interesting! We are looking at the more stable, 5-year stock returns.
Over the past 5 years,
Both Facebook and Alphabet stocks are on par with market returns at 150%.
So by the end of round 4, we still don’t know who is the actual winner here. Both these stocks are pretty much on par till now.
Knockout Round 5:
Let’s make this the final round with the maximum timeframe for stock market returns. I mean to say investment returns since both these companies started trading for the first time.
Are you ready people?
Facebook stock has returned 159.72% to date.
While for Alphabet (Google) it is 155.47% to date.
The final winner here is Facebook, based on the market data available and facts.
Blue Chip Growth Stocks Vs. Dividend stock
If you are a young Canadian in the early 20s or 30s and just starting out, I sincerely request you to invest in Blue chip companies.
It not Apple or Microsoft, any of the blue chips – US or Canadian.
Some of. the best evergreen blue-chips are: Facebook, Coca Cola, Nike, Nvidia, Amazon, Apple, Microsoft, RBC, CIBC Alphabet and the list goes on.
These all are massive blue-chip companies with an absolute beast in terms of earnings potential. They can resist the market falls and rise back higher with time.
Also, these blue-chip stocks will easily beat your S&P 500 Index funds, NASDAQ Top 100 Index funds or any stock you can name. They are the market drivers in terms of index weightage.
What About the Dividend Only Stocks then?
Dividend stocks are good, no doubt about it, for example, take Enbridge.
Enbridge (ENB) is a great stock with over 7% quarterly dividend and a decent 15% EPS growth YOY for the past 5 years.
Let’s say you invest $10000 today into ENB stock.
Over the next 5 years, it might grow to $15,000 dividends in your TFSA or RRSP accounts. Is that all you want? Oh yeah, ENB increases dividends every year.
Ok, forget ENB for a moment.
Take RBC, CIBC, BNS, Shopify, Dollarama, ZSP, VFV, VCN, XRE, XUS, XIC – can any of these stocks or the best of the ETFs match the returns by Apple or Microsoft?
I bet they cant.
Then why be conservative?
What is the point you want to make?
What’s wrong in being aggressive when you have all the time in the world.
Is Something Wrong With ETFs Then?
I personally own ETFs too. But I love growth stocks more.
That’s where the majority of my money goes to.
ETFs are good, they help diversify. But that’s not everything. GICs and Bonds are good too. It all depends on what you want and the allocation percentage with age.
The real problem with ETFs is, they hold 100s or even 1000s of stocks and track the entire Index.
Even if you consider the best of the best S&P 500 Index funds, including the Canadian hedged funds, you’re still talking about 15% returns per year (max).
Instead, invest in Microsoft, or Apple stock, I’m sure it will be more. It’s like your entire money is growing with the best in the class rather than the entire class where someone flunks and your growth is hampered for the moment. Also, too many eggs in the basket (ETF) will spoil the entire basket. Can we focus on 100 students all at the same time? Is that even possible? We have our favourites in everything, then why not stocks? Why the conservative approach and wait for the returns?
Last but not the least, Canadian Bonds are good too and so are Mutual Funds and TD e-series. It all depends on what are your goals are.
All I can say is make your investment count and invest for the long term in good growth companies.
Facebook Vs. Alphabet Stock: Conclusion
In this article, I took a general approach to educate newbies/investors on the importance of investing in Bluechip company stocks such as Facebook or Alphabet. I just took the fun side by using the terms knockout as in Boxing rounds 🙂
Compared to Facebook and Alphabet stock, Microsoft or Apple is definitely better in terms of the overall market returns for the longer term.
Please do not time the markets when investing in blue-chip’s and don’t expect heavy dividends here. If you need excellent dividend stocks, go for REIT’s such as RioCan, ENB, Fortis, etc or XRE ETF (pool of REITs in one place with more diversified and one place all REITs)
When it comes to blue chips, they are massive growth stocks that can resist any market crash. The market falls are always temporary and the bounce back will be hard.
You just need to invest and relax, forget the investment for a couple of years. See the compounding magic for yourself.
That’s all for now, hope you liked and enjoyed the content. Please let me know your thoughts and comments below 🙂 Also do share the content and help spread the word.